Acquisition of Global Solutions Limited (“GSL”) by G4S plc (“G4S”)
GSL, is owned by private equity firms Cognetas and Englefield Capital and the management team and is an international leader in the provision of support services for governments, companies and public authorities. G4S’s acquisition of GSL is based upon a compelling strategic rationale:
- GSL provides additional expertise to G4S in key markets such as the Government sector and provides G4S with opportunities to broaden its secure outsourcing offer to its customers
- GSL provides additional scale to G4S’s existing Justice Services activities, particularly in the UK adult and juvenile custodial, secure escorting, immigration and police sectors
- GSL provides G4S with an excellent platform for the international development of Justice and other Government services in South Africa, Australia and Ireland
- The combined Justice Services business is well placed to secure additional contract wins from the expected medium term pipeline as the public sector continues to expand the breadth and depth of its outsourced activities
- GSL provides G4S with significant additional outsourcing credentials in the UK, supporting the G4S strategy of expanding further into the long term Government and commercial outsourcing sectors
- GSL’s long-term contractual relationships provide a strong underpinning to future revenue and profit streams
G4S expects the acquisition to result in annual running rate cost synergies of not less than £7 million and to be earnings enhancing in 2008. G4S expects the post tax return on invested capital (ROIC) to exceed the group’s weighted average cost of capital (WACC) within three years of completion.
In the financial year to 31 December 2006, De Facto generated sales of £402.4 million, reported a loss on ordinary activities before tax of £(21.3) million and had gross assets of £247.3 million. For the year ending 31 December 2007, GSL is expected to generate sales of £423 million and adjusted EBITA of £30 million.
The acquisition is subject to approval from the European Commission and the South African Competition Commission. The acquisition is a Class 2 transaction for G4S under the Listing Rules and is expected to complete following the receipt of such approvals in 2008.
Commenting on the acquisition, Nick Buckles, Chief Executive Officer of G4S plc said:
"The early phases of development for G4S successfully focused on integrating two organisations, delivering synergy benefits and spreading best practice across the service lines – at the same time we have continued to drive margin improvements and growth across the businesses.
In November we outlined the main elements of the next phase of our strategy which are to build increasing partnerships with our customers in key sectors such as Governments, where we become their secure outsourcing partner of choice.
The acquisition of GSL fits right into the heart of our strategy and is typical of our plans to acquire expertise in key service lines and sectors, enabling us to further develop our offer to our customers. Over time, we expect to move towards a higher proportion of long term, recurring revenue contracts with G4S taking a broader range of responsibility for customers’ risk management and protection. The addition of GSL to our organisation is a significant step in this next phase of development.”
Nick Buckles, CEO
Trevor Dighton, CFO
Debbie McGrath, Group Communications Director
Kevin Smith, Citigate Dewe Rogerson +44 (0) 7973 672649
The replay of the investor and analyst conference call held will be available until Tuesday 25 December from +44 (0)20 7031 4064 (access code 778778).
There is a slide presentation to accompany the call.