G4S rallies sharply on hostile bid from GardaWorld

Shares in G4S are rallying sharply in today’s session. GardaWorld Security has made a final hostile bid to acquire the British security firm for approximately £2.97 billion. G4S shareholders will be entitled to receive 190 pence in cash for each share. BC Partners, which owns a 51% stake in the Montreal-based security company urged G4S’ shareholders to engage in talks earlier this month. BC Partners said it had previously been ‘summarily dismissed or ignored’ after initially approaching the G4S back in mid-June.

If the deal goes ahead, it would among the top ten UK take-privates over the last five years according to Refinitiv data, cited by the Financial Times. The FT also reported that GardaWorld’s CEO said ‘this is a rescue bid. We’re here to make the pain go away for shareholders’.

Meanwhile ahead of the news, the analyst team at Credit Suisse raised its price target on G4S this morning from 185 pence a share to 220 pence a share. The stock is currently trading around 197p at the time of writing.

Technical analysis: G4S

Taking a look at the chart of G4S, the security firm came under intense selling pressure in the first quarter of 2020 amid the pandemic driven global market sell-off. However since the April lows, it has been on the recovery. A bull flag consolidation pattern in August was completed in dramatic fashion with a sharp jump in the shares this month amid M&A speculation. The stock has now managed to break above the 76.4% Fibonacci retracement level, which puts it on track to test gap resistance from February at the psychological round number of 200p. A break above this level would suggest the stock is poised for further gains and would put G4S on track to test the 100% fib level at 233.45p. One note of caution comes from the RSI indicator which has been above 70 in overbought territory since Monday 14th September. However while this can suggest a stock is looking overvalued it can also be a function of a strong uptrend, which in this case it appears as though the latter is more likely. A break back below 70 for the RSI could negate this view with the potential for some technical analysts to use this breach as a sell signal.