A good month for Garda

Canada's largest security firm dives into the U.S. with major acquisitions in November--still has cash on hand for more
Sunday, January 1, 2006

MONTREAL, Quebec--Garda World Security turned heads Nov. 27 with its agreement to purchase Vance International from SPX Corp. for $67 million. This was just the latest move, however, for a rapidly growing company that's already the largest security company in Canada, in terms of market share and revenue.
Also in November, Garda bought Ontario Guard Services, with annual revenues of $14 million, for $3.7 million; bought the Chicago-based United Armored Services, the sixth largest in the United States at $40 million in annual revenues, for $13 million; and secured more than $138 million in financing. The United Armored acquisition also put them into the U.S. market for the first time.
The Vance purchase shows Garda isn't entering the market timidly.
"If you monitor the industry," said Garda chief executive officer Stephan Cretier, "you know that Vance is the gold standard of security services in the U.S. and that was really what we were looking for. Here in Canada, Garda is seen as a premium service provider. We service 80 percent of Fortune 500 companies present in the country here, and I think Vance, when you look at their list of clientele, it was almost a fantasy. We didn't want to enter the U.S. market in terms of commodities services, but more in terms of higher standard services."
Jack Mallon, an industry analyst with Mallon Associates in New York City, thinks Cretier did well. "He got a good deal with Vance and a good deal with United Armored," he said. Further, when told Cretier would like to be "the Securitas of this world," Mallon said he was headed in the right direction. "He's got a way to go before he's in the Securitas ballpark," said Mallon, "Securitas is an $8 billion company, Garda is a $500 million company, [but the] growth of the company has been phenomenal and impressive." Also, said Mallon, "They're diversified. He's been picking up guard companies, investigative companies, armored-car companies. He's got a balanced and diversified security plate." Mallon noted that Garda's stock has gone from roughly $1.50 on Jan. 1, 2004, to it's current price of $14: "People who bought Garda have done handsomely."
"I think we've built a kind of model that really resembles the Group 4 model," said Cretier. "The only difference is that they've acquired companies in the US that are more oriented toward commodities rather than this premium quality service." He sees Group 4 and Securitas operating on more of a "European model," whereas, "at the end of the day, we're Americans, we're in America."
Also, he said Garda is not done making acquisitions. The financing package, secured through a banking syndicate led by BMO Nesbitt Burns and Caisse de depot et placement du Quebec, should make that obvious. "Definitely, people have made the calculation," said Cretier, that Garda has money left on hand even after their recent purchases. "We're not doing those two transactions and saying we're going to be a small player," said Cretier. "Our challenge in the next 10 years will be to battle with the big ones, full-service security services. There will be other acquisitions for sure."
For Vance's part, SPX's media relations head Tina Betlejewski thinks "that would be a good opportunity for them. They're going to be with an owner that really wants to grow that business." Vance president Drew Ladau, who along with the rest of Vance's senior management will be retained, said in a press release that, "Our vision is to be a single point of contact in security and investigations services. Together, Vance and Garda will offer clients the first truly total security solution in the North American marketplace."
"We've picked up excellent senior management," said Cretier. "They really look excited ... We think they're going to really be growing in the next few years."