Shares in G4S (GFS) fell 13% as it announced a £5.2 billion acquisition of ISS. There will be a £2 billion rights issue.
ISS is a Danish-based international facilities services business.
"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, while chairman Alf Duch-Pedersen added that the acquisition would bring together "two high-quality companies and management teams with a very strong business performance and integration track record."
G4S plans to finance the acquisition through a mixture of equity and debt, announcing a £2 billion, seven-for-six rights issue. G4S management believes that the acquisition will lead to earnings per share accretion in the first year and double-digit accretion in three years, with £100 million of pre-tax cost savings by 2014.
"Although G4S has in the past proved effective at integrating large acquisitions (e.g: Securicor and Group 4 Falck) this is will double the size of the group and there are bound to be some transactional risks in the short term," cautioned de La Soujeole as she downgraded G4S from 'buy' to 'hold'.
G4S also announced "continued strong performances in new markets and stable growth in developed markets" in its third-quarter trading statement published on Monday. Organic revenue growth was 5%, with developed market growth of 3% and developing market growth of 3%. EBITA margin was "slightly lower than the same period in 2010", although no figure was given.
