Insider Media Limited

Security service provider G4S's £5.2bn deal to buy Danish company ISS may be voted down by shareholders as concerns over a £2bn rights issue grow.

The security services provider, which controls Birmingham prison, announced on Monday (17 October) its plans to purchase ISS. However, reports suggest that the proposal has been met with resistance from Parvus Asset Management, which is among its largest investors.

Concerns have also been raised about how the group would handle a workforce of 1.2 million.

G4S's shares fell by 22 per cent to 219.9p, its biggest slump in seven years, following the announcement of the deal to the stock exchange.

Shares, which finished last week at 281.5p, had recovered to 240.2p at close of trading yesterday (20 October 2011).

The prison operator said the acquisition would create the "world's largest integrated security and facilities services group".

G4S plans to buy ISS from private equity companies EQT and GS Capital in a bid to offer extended services such as cleaning to its clients.

Its proposals to raise more than £2bn through a seven for six rights issue at 122p is now at the heart of shareholder worries.

The deal will bring in an estimated £100m of annual pre-tax cost savings by 2014, G4S said. It added that by the same year, an investment of £20m would have been made by creating "service excellence centres" to share practices across the company.

G4S's chief executive Nick Buckles said this week: "We believe this acquisition will transform our business, significantly accelerate the delivery of our solutions strategy and create substantial value for shareholders."

If the deal is completed, G4S will employ more than 1.2 million people. The company was already the FTSE 100 Index's biggest employer.

Deutsche Bank AG, Royal Bank of Scotland Plc and HSBC Holdings are underwriting new debt facilities for the multi-billion pound deal.

Deutsche Bank, Greenhill, HSBC and RBS Hoare Govett all advised on the deal.