Combining ISS and G4S - Creating the world's largest integrated Security and Facilities Services Group
Today, G4S plc (“G4S”) announced the acquisition of ISS A/S (“ISS”) from FS Invest II S.à.r.l. ("FS Invest"), which is indirectly owned by funds advised by EQT Partners (“EQT”) and by GS Capital Partners. The transaction values ISS at around £5.2 billion or DKK 130 per share.
FS Invest will receive half of the consideration in cash and half in new shares in the enlarged G4S group which are expected to represent approximately 11% of G4S’s share capital. Shares in the enlarged G4S group will be traded on the stock exchanges in London and Copenhagen, and FS Invest’s shares in G4S will be subject to a lock-up restriction for nine months.
The board of directors of ISS and the owners believe that the contemplated transaction is strategically compelling and that it will create a global leader in integrated security and facilities services, with continued strong growth potential. The combined group will have more than 1 million employees in more than 130 countries and combined revenue of £15.9 billion in 2010. Around 25% of the combined revenue of the group will come from fast-growing emerging economies.
Ole Andersen, Chairman of the Board of ISS, commented: “The combination of ISS and G4S is a good fit both industrially and culturally. Together they can increase their exposure to the significant growth opportunities in emerging markets and accelerate their efforts in the growing market opportunity for integrated facilities services. The corporate cultures complement each other and the highly competent senior management at both G4S and ISS will together create a strong and experienced team to lead the combined group.”
Jeff Gravenhorst, ISS’ Group CEO, commented: “Since ISS was taken private we have successfully developed and implemented our strategy and transformed the company to a global leader in Facility Services. We built the delivery platform both through acquisitive and organic growth. Since the beginning of 2005 the average organic growth has been 4% per annum and we are today reporting 7% organic growth for the third quarter of 2011. Together the two companies will create an even stronger platform for the future.”
Together, ISS and G4S will be able to accelerate the provision of facilities services building on both companies’ significant global expertise in the form of single-service, “bundled” services and facility services. The combined group expects significant growth opportunities and synergies to be achieved in the coming years.
The combined group will be headed by G4S’ CEO and CFO. On completion, ISS’ current CEO Jeff Gravenhorst will join the G4S board of directors and will head up the combined European operations as Chief Operating Officer and Regional CEO Europe.
To conclude the transaction, approval is needed at a G4S shareholders’ meeting as well as from certain regulatory authorities.
For further details of the transaction see the press release from G4S.
Today, ISS also reported preliminary results for the nine months 1 January – 30 September 2011.
- Revenue up by 6% to DKK 57.8 billion driven by organic growth of 6.4%
- For the third quarter organic growth was 7.0% - this marks the eighth consecutive quarter with an increase in the organic growth rate
- Operating profit before other items increased by 4% to DKK 3,180 million in the first nine months of 2011
- Operating profit increased by 7% to DKK 2,958 million in the first nine months of 2011
- North America, Latin America and Asia all delivered double-digit organic growth rates.The emerging markets delivered organic growth of 13% for the first 9 months of the year
- Operating margin (operating profit before other items as a percentage of revenue) of 5.5% for the first nine months of 2011
Jeff Gravenhorst, ISS’ Group CEO, commented: “We are encouraged by our results for the third quarter and for the first 9 months of the year. We are continuing to grow our business both in developed and emerging markets with increasing momentum now for 8 quarters in a row. Our focus on Integrated Facility Services, where we are continuing to expand our footprint and our strong presence in emerging markets, where we have more than half of our employees, is a strong driver behind our growth and success. With the announcements today, we are ready for a new era together with G4S. By combining the two companies, which share history, culture and strategy, we will create an even stronger platform for the future.”
Current Trading Group revenue amounted to DKK 57.8 billion in the first nine months of 2011, an increase of 6% compared with the same period in 2010, driven by organic growth of 6.4% and a positive effect from exchange rate movements of 1%, which was offset by negative net growth from acquisitions and divestments of 2%. The organic growth of 6.4% in the first nine months of 2011 was a continuation of the positive organic growth trend seen in 2010, fuelled by the start-up of several large Integrated Facility Services (IFS) contracts in 2011. Organic growth was 7.0% in the third quarter of 2011 and marks the eighth consecutive quarter with an increase in ISS’ organic growth rate. North America, Latin America and Asia delivered double-digit organic growth rates.
Operating profit before other items increased by 4% to DKK 3,180 million in the first nine months of 2011 compared with the same period in 2010. The operating margin (operating profit before other items as a percentage of revenue) of 5.5% for the first nine months of 2011 was 0.1 percentage points below the comparable period in 2010. Operating profit increased by 7% to DKK 2,958 million in the first nine months of 2011 compared to DKK 2,761 million in the first nine months of 2010. The increase was due to the increase in operating profit before other items as well as a net decrease in expenses recognised as other income and expenses, which was achieved despite recognition of costs of DKK 100 million primarily related to IPO preparations.
The preliminary balance sheet position and the preliminary LTM cash conversion at 30 September 2011 is slightly lower than in previous periods as a result of a change in payment terms of VAT and payroll and social taxes in certain countries combined with the strong organic growth and a slight increase in debtor days.
The emerging markets, comprising Asia, Eastern Europe, Latin America, Israel, South Africa and Turkey, where more than half of ISS’ employees are located, delivered organic growth of 13% and represented 19% of total revenue and 37% of total organic growth for the Group. In addition to boosting organic growth, these emerging markets delivered an operating margin of 6.8% for the nine months ended 30 September 2011, well above most mature markets.
Implications of the sale of ISS A/S for holders of notes issued by the ISS Group Related to the HY bonds outstanding (the EUR 525 million due in 2014, which bear an annual interest at the rate of 11 per cent referred to as the “2014 Senior Notes” as well as the EUR 454 million plus EUR 127.5m due in 2016, which bear an annual interest at the rate of 8.875 per cent, collectively referred to as the “2016 Senior Subordinated Notes”), the potential transaction contains a change of control provision which would trigger, in accordance with time periods provided for in the relevant indenture, an offer to repurchase the notes by the Issuer (or a third party as set out in the indenture) upon the completion of this transaction.
Ole Andersen, Chairman Jeff Gravenhorst, Group CEO
For further information, please contact:
Media: Kenth Kærhøg, Tel: +45 38 17 62 05
For FS Invest:
EQT: Johan Hähnel, Communications & PR +46 8 506 55 334
GS Capital Partners: Joanna Carss, +44 (0)207 774 4102
The ISS Group was founded in Copenhagen in 1901 and has grown to become one of the world’s leading Facility Services companies. ISS offers a wide range of services such as: Cleaning, Catering, Security, Property and Support Services as well as Facility Management. Global revenue amounted to DKK 74 billion in 2010 and ISS now has more than 530,000 employees and local operations in more than 50 countries across Europe, Asia, North America, Latin America and Pacific, serving thousands of both public and private sector customers. For more information on the ISS Group, visit www.issworld.com.
ISS A/S, CVR 28 50 47 99,
ISIN XS0253470644 ISS Global A/S,
ISIN XS0206714247 ISS Financing plc,