10/17/2011 05:22 EDT | Updated 12/17/2011 05:12 EST

UK security firm G4S agrees to take over Denmark's ISS in $8.2 billion deal

LONDON - British security company G4S PLC says it has agreed to acquire ISS A/S in a cash and shares deal which values the Danish company at 5.2 billion pounds ($8.2 billion).

G4S said Monday the combined company would be the world's largest security and facilities group, merging two firms with combined annual revenues of 15.9 billion pounds last year. ISS is the larger company, with revenue of 8.5 billion pounds.

The market reacted negatively, with GFS shares down 18 per cent at 230 pence in midmorning trading.

Although G4S has a good track record of intergrating acquisitions, including Securicor and Group 4 Falck, "there is bound to be some transactional risks in the short term," said Caroline de La Soujeole, analyst at Seymour Pierce. She downgraded the shares from "buy" to "hold."

G4S said it expects the takeover to yield savings of 100 million pounds annually within three years.

FS Invest II, the sole shareholder of ISS, will receive 130 Danish krone per ISS share, half in cash and half in G4S shares. G4S will also take over debt from ISS.

The acquisition and rights issue are subject to approval at a G4S shareholders' meeting on Nov. 2, and to regulatory clearance.

If the rights issue goes ahead but the acquisition does not, G4S said it would hold the cash and look for other expansion opportunities, or perhaps ultimately return cash to shareholders.