G4S shares jump 24% on M&A speculation

Shares in G4S PLC are trading sharply higher by more than 24% in today’s session after Canadian security firm, GardaWorld made an offer of £2.95 billion for the London listed company. GardaWorld made three approaches for G4S between 15th June and 31st August this year. However G4S rejected the proposal of 190 pence a share, which represents a 30% premium to Friday’s close.

GardaWorld said it “encourages G4S’s shareholders to mandate their board’s engagement in collaborative discussions towards a transaction that would be of clear and immediate benefit to G4S’s shareholders, customers, employees and members of the company’s pension schemes.” Last year GardaWorld mulled a cash offer for part or all of G4S, in the end deciding not to pursue the UK security business.

G4S’s share price has come under pressure lately making it more vulnerable as a potential takeover target. On top of the coronavirus pandemic, it has faced a series of challenges, including the loss of a contract at Birmingham prison and charges of fraud to some of its former executives.

G4S: technical analysis

Before today’s rally, shares in G4S has shed a third of their value this year. It suffered heavily at the start of 2020 amid the global sell-off, shedding 58% in the first quarter alone. However since the lows at the start of April, the stock has been on the recovery trading in an ascending trendline with a series of higher highs and higher lows. August saw the stock trade in a bull flag formation, with a downward trending channel. This consolidation pattern, which is found in an uptrend tends to resolve on the upside, and has done so with today’s green marabuzo candle, breaking above key resistance at last August’s low of 165 pence. The next resistance level is at 182 pence, which was key support at the end of last year. A break above would help drive the bull trade.