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Garda World Security Corp. is in "very advanced" talks to sell its armoured car or cash-in-transit division, but may go private if a deal is not consummated, chief executive officer Stéphan Crétier said Tuesday, as investors cut the company's stock market value in half following unexpected losses.

A special committee of Garda's board has hired investment banker BMO Nesbitt Burns to advise it on the unsolicited offer it received for the division - the second biggest armoured car business in North America - but also to look at other potential strategic alternatives, Mr. Crétier said in a telephone interview.

"What my board decided to do yesterday is say . . . 'Yes, we've got a very strong offer and we think it will lead to a final transaction, but at the same time, we want to ensure the best shareholder value for everyone'," he said.

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He would not identify the suitor, although analysts said it is most likely one of the four other top players in the business: G4S PLC of Britain, Securitas AG of Sweden, Brink's Co. of Richmond, Va., and Prosegur Group of Spain.

However, if this transaction does not work out, Garda will look at going private, said Mr. Crétier, who owns about 25 per cent of the Montreal-based company. It has expanded by acquisition at breakneck speed over the past several years.

"I have grown this business through leverage and through debt and today we're in a capital structure in which it is very difficult to continue to grow," he said. "I think I have asked the maximum from my banks, and I can't ask them for more than they have done for me."

The armoured car division accounts for about 55 per cent of Garda's revenue and 60 to 65 per cent of its earnings before interest, taxes depreciation and amortization, Mr. Crétier said.

Garda's already battered shares went into freefall Tuesday after it revealed an unexpected second-quarter loss of about $1-million, or 3 cents a share, and a tougher lending agreement with its bank, as well as the potential asset sale.

The shares plunged as far as $3.29 on the Toronto Stock Exchange in early trading, before inching back to $4.09 in mid-afternoon, down $4.76 or 53.8 per cent.

This was barely a fifth of the 52-week high of $20.44 they hit last October, and it reduced the company's market value to about $129-million from $278-million at Monday's closing price of $8.85.

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Garda said in a news release the potential asset sale "or any other transaction of this type could allow the company to book a profit, repay most, if not all, of its bank debt and return some capital to its shareholders."

The loss for the three months ended July 31 compared with $1.5-million or 5 cents a share of red ink in the second quarter of last year and came as revenue fell to $301-million from $318.6-million. Earnings before interest, taxes, depreciation and amortization (EBITDA), meanwhile, came in at $22.7-million, or 72 cents a share, down from $23.3-million, or 75 cents.

This badly undershot Bay Street forecasts. On average, analysts surveyed by Bloomberg, were betting that Garda would turn in a profit of 17.8 cents a share and EBITDA of $33-million.

Garda said that as a result of the diminished EBITDA, it had breached its loan covenants. As a result, it has hammered out a new agreement with its lenders under which the interest-rate margin on its revolving and senior term loans has been increased by 1.5 per cent and those on its subordinated term loan by 3.25 per cent.

Analyst Sara O'Brien at RBC Capital markets who has a "hold" rating on the stock, calculated the new agreement will boost Garda's total interest costs by 11 per cent.

Analyst Martin Landry at Desjardins Securities cut Garda to "hold" from "buy," citing the impact of the increased interest expense on cash flow, as well as "limited visibility" on future profitability and the uncertainty surrounding the strategic review.

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Garda's long-term debt totalled $623.5-million at the end of the second quarter, up from $128.7-million just two years earlier, with much of the increase reflecting the company's largest acquisition to date, the $395-million takeover in April, 2007, of ATI Systems International Inc., a Los Angeles armoured car company.

"Despite two excellent quarters demonstrating the quality of our integration initiatives, we are announcing disappointing results as a consequence of the economic slowdown in the U.S., a weak U.S. dollar versus the Canadian dollar and higher energy costs in Canada," Mr. Crétier said in the news release.

"We believe this to be just a weak summer and anticipate a stronger second half of the year . . . Our fundamental operations throughout the company are doing well, in spite of the financial pressure related to our high leverage. Garda has the resiliency and management acumen to withstand the current situation and emerge quickly as a stronger company."

It has been a difficult year for Garda on the image front. It is enmeshed in a messy lawsuit with the former head of its security business in war-torn Iraq. As well, it has been sued for wrongful dismissal by the former head of ATI, who alleges that Mr. Crétier threatened to kill him and his family if they leaked any information about the supposedly rocky state of Garda's business. Garda has denied the allegations.

Garda said its Canadian businesses generated $120.1-million in revenue in the second quarter, down from $121.2-million a year earlier, while U.S. revenue fell to $180.9-million from $197.3-million.

Split by division, revenue in the physical security segment of the company's operations fell by just under $10-million to $152.6-million. Garda attributed this to the sale of its Keyfacts division in Canada last fall, the non-renewal of a number of security contracts at U.S. military bases, and the rise of the loonie against its U.S. counterpart.

In the armoured car business, revenue fell by about $7.5-million to $148.4-million, which the company said was a result of the currency shift and the U.S. economic slowdown.

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