Back in late June, analyst Nadi Tadros at Desjardins Securities Inc. published his first research report on Garda World Security Corp., labelling the fast-growing Montreal security services company a potential takeover target, and calling its shares a "buy."
Mr. Tadros cited the accelerating consolidation in the fragmented security industry that has seen several Europe-based giants such as Securitas AB and Group 4 Falck steadily expanding through acquisition in the United States and, to a lesser extent, Canada. "Given the rate of industry consolidation, Garda obviously becomes a takeover candidate," he said in his report.
But if building a company competitors want to buy is the ultimate compliment for an entrepreneur, it is also an accolade that Garda chairman, chief executive officer and major shareholder Stéphan Crétier insists he isn't ready for just yet.
"Well of course we are [a target] and of course we've received calls in the past . . . and of course we're being monitored," Mr. Crétier, who owns 31.5 per cent of Garda, said this week. "But I'm only 41 years old, and we're not at a level, I think, where our shareholders would get the best value for the business.
"We think we can double the value of the business within the next three or four years, to $24-million to $28-million in EBITDA [earnings before interest, taxes, depreciation and amortization] because we're very well positioned," he added in a telephone interview.
After nine acquisitions in the past five years, Garda has about 8,000 employees and is among the three largest security firms in Canada. It provides security guards and airport screening staff, and armoured car services. It also has small investigative and electronic surveillance operations.
Late last year, the company made its largest acquisition to date, the $12.2-million purchase of Secur Inc., the "cash-in-transit" or armoured car division of Caisse Centrale Desjardins du Québec. And earlier this year, Garda won its first major airport screening contracts, at Toronto's Pearson International Airport and Pierre Elliot Trudeau Airport in Montreal.
In mid-September, the company reported a profit of $3-million or 13 cents a share on revenue of $82.2-million for the six months ended July 31, well up from $1.7-million or 3 cents on revenue of $39.7-million a year earlier.
Its revenue, just $600,000 in 1995, is expected to hit $180-million this fiscal year (ending Jan. 31) -- ranking it second in Canada only to the private, not-for profit Canadian Corps of Commissionaires -- and $205-million next year.
Mr. Crétier, a former property management executive, switched to the security business in 1990. Five years later he launched his own firm, Trans-Québec Security Corp., soon renamed Trans-Canada Security Corp. to reflect his growing ambition. In the summer of 1999, he took the firm public.
He also spent $5.5-million that year to buy Garda Security Services Ltd., a well-known Quebec firm founded in 1973 by a former senior executive in the Bronfman family's Seagram empire. He adopted the Garda name in recognition of its strong reputation.
As well as attracting interest from Mr. Tadros and one or two other analysts this year, Garda's prospects are sufficiently intriguing to have brought in Boston-based mutual fund giant Fidelity Management & Research Co. as a major shareholder. Fidelity disclosed in July that it had bought a 10.08-per-cent stake in the company.
Garda's stock has responded to this new investor interest by going on a bit of a tear in the past few months. It broke through $3 a share on the Toronto Stock Exchange in February and has been climbing mostly upward since June, hitting a new high of $4.57 last month. Yesterday, the shares closed at $4.80 apiece, down 5 cents from Thursday's finish.
At this price, the company's total stock market value is more than $106-million, and in a follow-up report last month, Mr. Tadros suggested Garda might fetch $6 to $7 a share in a takeover. That would add up to about $180-million in all.
Still, for now at any rate, Mr. Crétier reiterates that he is more interested in making additional acquisitions than being acquired, and in winning more big cash-in-transit and airport screening contracts.
He is also quite happy to take shots at the multinationals who, if Mr. Tadros is correct, might be bidding for Garda down the road. "We can grow this business to over $300-million of revenue in the next few years here in Canada without any risk, in a market I know better than any of the European players that are present," he said.
PROFIT FOR SIX MONTHS ENDED JULY 31
SALES FOR SIX MONTHS ENDED JULY 31
NUMBER OF EMPLOYEES
GARDA WORLD DAILY CLOSE, GW-TSX
Yesterday's close: $4.80, down 5¢
SOURCE: THOMSON DATASTREAM