A war of words between Caisse de dépôt et placement du Québec and GardaWorld flared up further Wednesday as the chief executive officer of the security services company criticized the pension fund giant for using retiree money to back an offer by Allied Universal Security Services LLC for rival G4S PLC.
In an interview with The Globe and Mail, Garda founder and CEO Stéphan Crétier said he and his employees are shocked that the Caisse, which is the second-largest shareholder of U.S.-based security company Allied, with a 35-per-cent stake, would support a bid by Allied for problem-plagued G4S. Garda is also trying to buy British-based G4S and has made an unsolicited cash offer that Mr. Crétier dubs “a rescue.”
“You don’t play with public money like that in assets that are plagued by scandals,” Mr. Crétier said of the Caisse’s involvement in the hunt for G4S through its Allied investment. “I just can’t believe they’re doing something like that.”
It is unusual for such corporate disagreements to be aired so openly in the province, in this case between two well-known Quebec Inc. institutions. It is even rarer for the Caisse to hit back so forcefully.
Caisse CEO Charles Emond defended the pension fund’s actions in an interview with Le Journal de Montréal published Wednesday, saying the Caisse has considered the social responsibility implications in its security services investment. He said the Caisse is not trying to undermine Garda’s efforts to win G4S and even offered Garda more than US$1-billion to help finance its own takeover bid for the company – money Garda rejected.
It’s not only Mr. Crétier’s offer for G4S that’s hostile, but also the narrative he’s using to promote it, Mr. Emond said.
On Tuesday, a spokesman for the pension fund said: “There is something fundamentally inconsistent in Garda’s hostile and aggressive approach in the public sphere. One day it approaches the Caisse about a partnership, then it withdraws from its agreement [with us]. One day it wants to acquire G4S and the next it is criticizing the [environmental, social and governance] aspects of the company it wants to buy.”
Speaking to The Globe, Mr. Crétier sharpened and expanded on comments he made earlier in the week, when G4S confirmed it had received a conditional offer from Allied that values the company at £3.25-billion (US$4.2-billion). He told The Globe that Allied’s takeover attempt of G4S is “doomed to fail” on U.S. antitrust grounds and characterized G4S as a mess that Garda is best equipped to clean up.
Allied has limited experience operating outside the United States and has never run businesses in the Middle East or correctional facilities, Mr. Crétier said. The company is not a suitor with the competency to fix G4S, he said, and neither is the Caisse.
When Garda and the Caisse discussed investments in the past, officials with the pension fund made a point of saying they didn’t like Garda’s “headline risk” that came from operating in places such as Africa and Iraq, Mr. Crétier said. He said it doesn’t make sense that it now supports making an offer for G4S, a company with even more risk.
The Caisse invested in Allied together with U.S. private equity firm Warburg Pincus and Allied’s senior executives in a February, 2019, deal that valued the company at more than US$7-billion. At the time, the Caisse said its investment would include up to US$400-million of capital to be used by Allied to pursue its growth strategy and make acquisitions.
That announcement came as a surprise to Mr. Crétier, who said it would be like Caisse investing in Japan-based convenience store chain 7-Eleven to compete against Quebec-based champion Alimentation Couche-Tard. Still, he said he didn’t raise any objections.
“I didn’t want to start a fight on that. I said, ‘Ok maybe they made a mistake. Maybe it was their London team that did [the deal]. We’ll forget about it.’ But taking Allied and competing against me for G4S when there’s so many scandals there and the company doesn’t have an experience in fixing this? Come on. When they told me that I’m too risky in terms of headline news? It’s just unacceptable.”
G4S has worked for years to try to tighten operations after a series of crises and allegations that have tarnished its reputation. The company sold its youth detention business after the BBC broadcast evidence in 2016 of G4S staff abusing inmates at a young offenders institution in Kent, England. It also faces a lawsuit from U.S. military and civilian personnel injured or killed in terrorist attacks in Afghanistan alleging that G4S and its subsidiaries provided “protection payments” to the Taliban.
Many of these problems continue, leaving G4S and its stakeholders exposed to a legacy of further claims, provisions and contingent liabilities, and further clouding the company’s financial forecasts by creating meaningful cash flow uncertainty, Garda has said in filings supporting its G4S bid.
“This will not be a quick or an easy fix,” Raymond Svider, chairman of Garda’s controlling shareholder BC Partners LLP, said in one filing, adding the company is prepared to commit substantial resources for a G4S turnaround.
The current directors and senior management team of G4S inherited a number of long-standing, significant legacy issues, most of which have been resolved, a G4S spokeswoman said Tuesday.
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