G4 S buys security firm rival Armor Group for £43m
The Times (2008-03-21) David Robertson
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, the private security company, became another casualty of the war in Iraq as it succumbed yesterday to a £43 million bid from rival G4 S
The company, which provides embassy and convoy security, has seen profits decline for the past three years as its business in Iraq has dropped off.
, formerly Group 4, said that it would buy Armor for 80p per share, down from a peak of 263p in 2005. Armor's shares gained 23p to 76p.
Armor was one of the many private security companies that took advantage of a boom in work during the early stages of the Iraq occupation. British and American armed forces outsourced many activities to enable them to fight in Iraq with smaller forces. Private security companies typically took on work such as static and mobile security for buildings, vehicle convoys and government officials.
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Reconstruction spending in Iraq has since declined and troop numbers have also been reduced, leaving less work for these companies.
Armor said that its operating profit for last year fell to $6.3 million (£3.2 million) from $10.6 million the year before and $12.4million in 2005. Iraq revenue fell by 14 per cent to $119.7 million. The company said in November that its business in Iraq was faltering, which led to the departure of David Seaton, the chief executive.
The performance was made worse by the fallout from an incident involving Blackwater, the US-based security company. Blackwater guards are alleged to have killed 17 unarmed civilians in an incident that led to a crackdown on all security companies by the Iraqi Government and to foreign countries cancelling or delaying security contracts. The incident remains under investigation.
The fall in business in Iraq has forced security companies to consolidate and the acquisition of Armor is the largest deal in the sector so far.
said that it secured approval for its offer from 53 per cent of Armor's shareholders and that it expected to get final clearance from all shareholders in the coming weeks.
A spokesman for Armor said that the company did not know how the acquisition would affect jobs, including that of chairman Sir Malcolm Rifkind, the former defence and foreign secretary. Sir Malcolm said: “The offer by G4 S
gives shareholders the prospect of a cash exit at an attractive price when considered against the potential of Armor Group
as a standalone business.”
The pace of consolidation is expected to increase, but some security companies have moved into new markets, such as providing military-style management.
Oriel Solutions, a small British company, was given the contract to run security for last year's Cricket World Cup in the West Indies. It was responsible for training stewards in crowd control and anti-terrorism surveillance. Oriel brought its military planning to bear last summer in the UK when it worked with Gloucester County Council during the floods to ensure rapid procurement and deployment of items such as sandbags and portable toilets. Harry Legge Bourke, chief executive of Oriel, said: “There is still some work in Iraq, but it is not the same as it was.”