G4S Rejects $2.5 Billion Charterhouse Bid for Cash Unit

G4S Plc (GFS) rejected a 1.6 billion-pound ($2.5 billion) offer for its cash-handling unit from Charterhouse Capital Partners LLP, saying the business is a strategic part of the security-services company.

The offer for the division, which transports cash using high-security vehicles and manages ATM machines, “fundamentally undervalues the business and its prospects,” the company said in a statement today. “The board regards the nature and timing of the approach to be highly opportunistic.”

G4S, which in August agreed to sell its cash-handling unit in Canada, has suffered a series of blows to its home-market reputation. The Crawley, England-based company replaced its chief executive officer after failing to provide enough guards for last year’s London Olympics and was accused by the government of overcharging for electronic tagging of prisoners.

The world’s biggest security services provider, which generated about 10 percent of revenue last year from U.K. government contracts, last week said that U.K. chief Richard Morris will be replaced by an executive hired this year from Deutsche Post AG (DPW)’s DHL division.

Investor Pressure

Before today, G4S shares had dropped 17 percent in London trading in the last six months, valuing the company at 4 billion pounds, while the British FTSE 100 index gained 4.6 percent. Today, the stock gained as much as 2.4 percent to 264.60 pence and was up 1.8 percent as of 8:02 a.m.

Bloomberg reported the potential bid by Charterhouse on Oct. 19. The private-equity firm had approached banks and its investors over financing a deal, people familiar with the matter said earlier this month. Other private-equity firms have also shown interest in G4S’s cash-solutions business, said one of the people.

Cevian Capital AB, a Stockholm-based hedge fund and shareholder in G4S, has pressed the company to sell units including the cash-handling unit, the Sunday Times reported Sept. 29, without saying how it got the information.

“The cash-solutions business is integral to G4S’ operations and strategic plans,” G4S said today. Between 2007 and 2011, cash in circulation grew at a compound annual growth rate of 7 percent in mature markets and 12 percent in emerging markets, with transporting cash proving a resilient business during economic downturns, G4S said.

G4S’s cash solutions business made a profit before interest, tax and amortization of 135 million pounds on revenue of 1.29 billion pounds in 2012, according to G4S’s website. The business accounted for 24 percent of total profit.

Government Contracts

The U.K. government has said it may exclude the company from tendering for future tagging contracts.

Justice Secretary Chris Grayling said July 11 the company overcharged for the electronic tagging of offenders, including billing for dead people. The Serious Fraud Office said it is examining the tagging allegations, dealing another blow to the company after the bungled 2012 London Olympic Games contract.

In July, U.K. prosecutors also said they were reconsidering whether to charge former employees of G4S after a jury in London ruled that a man in their custody was unlawfully killed while being deported to Angola. In October, a U.K. parliamentary panel said G4S was providing “squalid” and “run-down” housing to asylum seekers under government contracts.

Former CEO Nick Buckles told lawmakers last year that G4S’s reputation was “in tatters” and that he agreed the bungled Olympics contract was a “humiliating shambles.”

To contact the reporter on this story: Andrew Noel in London at anoel@bloomberg.net

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