British security firm G4S will buy ISS in a £5.2 billion (€6 billion) deal pulled off by the Danish company's private equity owners after a failed IPO and against the backdrop of a slump in global takeover activity.
G4S, already the world's biggest security company, said it would pay £1.53 billion - half in cash and half in shares - for the facilities management group.
ISS, owned by Swedish private equity investor EQT and Goldman Sachs Capital Partners since 2005, had ditched a planned $2.8 billion IPO in March due to market turmoil.
ISS's two private equity owners had also broken off talks in January over an $8.5 billion takeover by private equity firm Apax after they disagreed on price.
EQT and Goldman bought the business for around $3.8 billion. They will end up holding around 11 per cent in the combined business.
G4S said the acquisition would enable it to move into a range of support services to complement its security operation.
"We believe this acquisition will transform our business, significantly accelerate the delivery of our solutions strategy and create substantial value for shareholders," said G4S chief executive Nick Buckles.
ISS offers facilities management services ranging from cleaning to catering and employs more than half a million workers worldwide. Last year it reported earnings before interest, tax and amortisation (EBITA) of £481 million, on revenue of £8.5 billion.
G4S focuses largely on security, employing over 635,000 workers in more than 125 countries. Last year, it posted EBITA of £527 million on revenue of £7.4 billion.
On a conference call with reporters, Mr Buckles said the deal would enable the combined group to meet demand for companies that can reduce costs by offering a wide range of support services as part of a single package.
"There's a real underlying customer demand for integrated services. By putting these together we can deliver lower cost and better service over the longer term," he said.
G4S has begun marketing billions of euro in loans to fund its acquisition. The new financing includes €4.1 billion and £230 million of term loans and revolving credit facilities, lenders said in a statement.
The firm plans to refinance most of the loans through bonds while retaining its existing £1.1 billion revolving credit maturing in 2016, chief financial officer Trevor Dighton said in a conference call today. The company has two years to decide how to refinance the first tranche of the loans, which will pay interest of about 150 basis points more than the three-month London interbank offered rate, he said.
G4S plans to refinance about £3.12 billion of the loans with bonds by the end of 2013, according to a person with knowledge of the transaction, who declined to be identified because the deal is private.
The financing comprises two-year loans for €2.6 billion and £230 million pounds, a three-year loan for €700 million and a revolving credit line for €800 million, the person said.
Deutsche Bank, Royal Bank of Scotland and HSBC Holdings are underwriting the new loans, according to a statement from G4S. The loans will repay about £4.3 billion of ISS debt, the banks said.
Agencies
