G4S PLC (LON:GFS) has received some mixed assessments from two investment banks after the FTSE 250 firm rejected a 190p per share hostile offer by Canadian rival GardaWorld on Monday, which valued the firm at around £3bn.
In a note on Tuesday, analysts at Deutsche Bank downgraded the firm to ‘hold’ from ‘buy’ and retained their price target at 170p, around a 10.5% discount to the offer price but around a 30% premium to G4S’s closing price on Friday, the last trading session before the offer was announced.
READ: G4S rejects £3bn hostile offer by Canadian rival GardaWorld saying it “significantly undervalues” its prospects
The bank highlighted that that offer price was still ahead of G4S shares after the stock has increased “more than 40% over the past three months”.
RBC offered a more positive view, increasing their target price for the company to 215p from 180p and retaining their ‘outperform’ rating.
The Canadian bank said while the initial approach from GardaWorld had been rejected, they saw potential for “a higher number and-or interest from elsewhere”.
RBC added that they “still think there is a good chance a deal can get done with risk reward still in favour”.
G4S reiterates opposition
In an announcement on Tuesday morning following its initial rejection of the bid, G4S reiterated its opposition to GardaWorld’s approach, saying the offer is “highly opportunistic” and “significantly undervalues the company and its prospects and is not in the best interests of shareholders or other stakeholders”.
The company continued saying it believed it is “increasingly well placed to deliver growth, profitability and substantial free cash flow as it delivers its vision of being the world’s leading global, integrated security company and the trusted partner of choice in the industry”, adding that its “resilient” first half performance in 2020 provided “confidence in the strategy and its execution”.
“Shareholders are strongly advised to take absolutely no action in relation to the new proposal”, G4S said.
Announcing its bid on Monday, GardaWorld, the world’s largest private security services company, said its attempts to engage with G4S’s board have been “summarily dismissed or ignored on three occasions” and so the Canadian company was now making the possible offer public to get the UK company’s shareholders on its side.
“G4S needs an owner, not a manager. GardaWorld has 25 years of experience in the sector and we know how to improve and repurpose this business,” said Stephan Crétier, founder, chairman, president and chief executive of GardaWorld.
“We will turn G4S around, ensuring it delivers for its customers, its people and the public.”
G4S shares were 1.2% lower at 180.2p in mid-morning trading, around 5.2% below the GardaWorld offer price.