G4S investors spooked by deal debt

TAKEOVER action accounted for the two biggest falls on the Stock Exchange yesterday, with one major deal going through but another transaction being scrapped.

Shares in security firm G4S plunged 22 per cent or 62.4p to close at 219.9p after the biggest employer on the stock market unveiled a £5.2 billion deal to buy Danish facilities management firm ISS. The move, which will see G4S develop its services into catering and cleaning, is being part-funded through a £2bn cash call to shareholders.

The rights issue, which will dilute the holdings of existing shareholders, and the scale of the debt being taken on spooked investors as G4S shares slumped.

Another big faller was property firm DTZ, which plunged 12.8 per cent or 3.5p to 23.75p after private equity firm and major shareholder SGP revealed it was pulling out of takeover talks.

In the broader market, investors lost confidence in the prospect of a speedy resolution to the eurozone debt crisis, forcing the Footsie to drop into the red.

The FTSE 100 index was up nearly 80 points in early trading amid optimism that a crucial European Union summit this weekend would agree the recapitalisation of Europe’s banks and protect countries from Greece’s debt woes. But it fell 29.66 points to 5,436.70 after the German government poured cold water on these hopes, saying a solution was not likely to be reached.

David Jones, chief market strategist at IG Index, said: “With the FTSE having gained around 600 points in the past couple of weeks on what appeared to be just verbal reassurance from politicians that everything would be OK, today has maybe served to inject some caution back into the market.”

The pound was up against the euro at €1.14 after the knock to the eurozone outlook hit the single currency. Sterling was down against the dollar at $1.57.

Insurer Aviva was 1p ahead at 340p but had earlier been ahead 10.4p at 349.4p after UBS upgraded the stock to “buy” from “neutral” and said the most euro- exposed of the UK insurers should recover this summer’s losses if a eurozone deal is done.

Legal & General was down 0.6p at 104.5p after it lost a 1.1p gain, while in the banking sector Royal Bank of Scotland shares were down 0.2p at 24.1p having previously been up 0.7p.

It was a similar story for miners, with Vedanta Resources and Rio Tinto both slipping into negative territory, down 7p at 1,206p and 43.5p at 3,302p respectively. The fall came as Rio unveiled plans to sell its aluminium business.

Market heavyweight BP was among the biggest risers, up 9.2p at 425.6p after an agreement that will see rival Anadarko pay $4 billion (£2.5bn) into BP’s Gulf of Mexico clean-up fund. The Texas-based firm held a 25 per cent share in the Macondo well that blew out in April last year.

In the FTSE 250 index, embattled food manufacturer Premier Foods enjoyed a rare session on the up, even though Citigroup lowered its rating on the stock to “neutral” from “buy” and cut its price target from 20p to just 5p. The Hovis and Branston owner, which issued a profits warning this month, rose 0.3p to 4.8p.

Scottish Aim-constituent Pinnacle Telecom was up 4.3 per cent – or 0.02p at 0.36p – after shareholders chose to turn their loan notes into shares.