G4S abandons £5.2bn ISS takeover deal
Security group G4S has ended its £5.2bn takeover of Danish cleaning company ISS after opposition from shareholders.
G4S said that after consultation with shareholders it concluded that it was "inappropriate to proceed".
Some shareholders expressed concerns about the takeover strategy and size of a rights issue to fund the deal.
The proposed takeover of ISS was one of the largest in the UK in the past couple of years, and would have given the combined group revenues of £16bn.
Chief executive Nick Buckles said in a statement that "we are obviously disappointed".
But G4S shares gave up early gains to end the day 0.4%, but nonetheless outperformed the 2.2% fall in the broader FTSE 100 index.
G4S chairman Alf Duch-Pedersen said: "We believe that developing our business towards an enhanced security and integrated facilities services model is the way forward in the longer term and we saw ISS as an excellent opportunity to achieve this aim.
"However, following the announcement of the acquisition, shareholders have raised concerns particularly over its scale and perceived complexity against the backdrop of current macro-economic uncertainty," he said.
When the takeover was announced on 17 October, Mr Buckles said: "We believe this acquisition will transform our business, significantly accelerate the delivery of our solutions strategy and create substantial value for shareholders."
However, G4S was planning to raise £2bn from shareholders to help finance the acquisition.
Investors were also worried that G4S could be diluting its focus on security operations for governments and in emerging markets.
On Monday, Harris Associates, which owns 5% of G4S, said it had voted against the takeover. Schroders and Artemis had already indicated they were planning to vote against it.
"We applaud the decision G4S has taken," said Mike Allen, analyst at Panmure Gordon. "We were concerned about the execution risk and the quality of future earnings.
"It's not what the shareholders wanted. They [the management] have done well so far but that wasn't the right move for them," he said.
ISS is owned by Swedish private equity firm EQT and Goldman Sachs Capital Partners.
The owners of ISS pulled the plug on a planned $2.8bn (£1.75bn) flotation of ISS in March because of market turmoil.