The Motley Fool

G4S shares leap again as a higher bid arrives. What would I do now?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Illustration of bull and bear
Image source: Getty Images.

It’s been a grim year for UK shareholders, with stock prices tumbling due to Covid-19. So far, the FTSE 100 has lost 1,135 points in 2020, down almost a sixth (15%). However, it’s been a bumper year for shareholders of unloved and undervalued FTSE 250 firm G4S (LSE: G4S). G4S shares have skyrocketed since September, after it received a hostile takeover bid.

G4S shares ride 2020’s roller-coaster

For the first eight months of this year, G4S shares moved in line with the wider market. At the end of 2019, the G4S share price closed at 218p and then gently declined until mid-February. Then, as Covid-19 spread, the G4S share price joined the spring market meltdown. By 3 April, G4S stock had collapsed to close at 69.92p — a sickening fall of more than two-thirds (67.9%) in just three months.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Then, as market fears over the global economy eased, G4S shares bounced back. The share price zigzagged upwards over the next five months, closing at 145.9p on 11 September. At this point, the stock was down a third (33.1%) since 2019.

14 September: a great day for G4S shareholders

On Monday, 14 September, came delightful news for G4S’s long-suffering shareholders. GardaWorld – a Montreal-based security-services company backed by private-equity group BC Partners – made a hostile takeover approach for G4S. GardaWorld offered 190p a share in cash to buy G4S from its shareholders. G4S shares surged to close at 182.45p, up 36.55p — a leap of a quarter  (25%) in a single day.

The next day, I urged G4S shareholders not to rush into any decision. I argued, “this takeover bid is just the first play for G4S” and added, “I’d await a higher price before selling any shares”. This guidance proved sound when, on 3 November, another bidder joined the party. US rival Allied Universal Security Services made a higher bid of £3.3bn for G4S, or at least 210p a share. Again, I suggested that “I’d still sit tight and do nothing”. I added, “I expect a final bid for the shares to be at least 225p–230p, so I would hang on to them today”.

What would I do now?

Today came news of a higher, supposedly ‘final’, offer from GardaWorld valuing G4S at £3.7bn. That comes to 235p a share, 17p ahead of the 218p at which G4S stock ended 2019. This makes G4S one of an elite group of large companies whose share prices have actually gained during this terrible year.

G4S shares now trade at 247p, 12p higher than GardaWorld’s offer. G4S shareholders have two weeks to accept this deal before it closes on Wednesday, 16 December. If Allied Universal wants to counter-bid, it must do so by 9 December. This suggests that time is getting tight for G4S shareholders to bag a better deal.

In summary, if I were a G4S shareholder (I’m not), I’d likely sell at today’s price — at 12p above the deal on the table — and walk away. However, shareholders who can stomach the risk might hold tight to see if a higher bid emerges within a week. If it does, then they might pocket another, say, 10p to 20p. If no other offers emerge, then the most on offer is 235p from GardaWorld. At this late stage, it’s mostly a toss-up, so the choice is tricky. Either way, G4S shareholders have had a rewarding 2020, so they should rejoice and be happy!

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story.

In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.