President and CEO of GardaWorld Stephan Cretier at a news conference in Montreal, on June 8, 2011.Graham Hughes/The Canadian Press
When Stéphan Crétier set out on his dream to turn Montreal-based GardaWorld into a top player in the global security business, he chose as his models two Scandinavian entrepreneurs.
The first was Melker Schorling, who built Sweden’s Securitas AB into the world’s second-largest security provider with a series of bold acquisitions in Europe and the United States, including big-name U.S. rivals Pinkerton Inc. in 1999 and Burns International in 2000.
The second was Jorgen Philip-Sorensen, an intrepid Dane who outdid even Mr. Schorling, turning G4S PLC into the world’s No. 1 player before his death in 2010.
Mr. Schorling and Mr. Philip-Sorensen were much older than Mr. Crétier when he founded Garda at 31 in 1995. But the now 57-year-old son of working-class parents who grew up in suburban Laval, Que., figured that if two entrepreneurs from tiny northern countries could build global security empires, there was nothing to stop him from doing the same from his base in small and frigid Quebec.
He just did not count on Caisse de dépôt et placement du Québec, whose mandate includes supporting local entrepreneurs, putting up obstacles in his way.
As he attempts his most audacious deal yet – a hostile takeover of London-based G4S valued at about US$5.2-billion – Mr. Crétier complains the giant provincial pension fund manager is undermining homegrown GardaWorld by backing a rival bid for G4S by U.S.-based Allied Universal Security Services LLC.
“I’m just trying to protect 25 years of hard work,” Mr. Crétier says of his decision to publicly voice his unhappiness over the Caisse’s move to stand behind Allied as it seeks to prevent GardaWorld from completing a deal Mr. Crétier has spent years plotting. “I’m just trying to protect a headquarters that is growing in Montreal.”
The Caisse, which has a dual mandate to promote Quebec’s economic development and earn returns for its deposit holders, once again finds itself on the defensive after writing off its US$170-million investment in Cirque du Soleil. Caisse chief executive Charles Emond got a cold reception from legislators, at an August hearing at the National Assembly, over the Caisse’s failure to protect the head office of the ailing Cirque, which is now owned by its creditors.
In an unusual move, the normally tight-lipped pension fund manager last week publicly shot back at Mr. Crétier’s “hostile and aggressive approach in the public sphere.” The Caisse has moved to put out its side of the story, seeking to discredit Mr. Crétier’s version of events and avoid being drawn into a delicate political debate over head offices, an issue close to the heart of the current Coalition Avenir Quebec government.
It may be too late for that. If GardaWorld is unsuccessful in its bid for G4S, it will be left with far slimmer pickings in the rapidly consolidating global security business. It is not inconceivable that GardaWorld could itself go on the selling block. While Mr. Crétier owns a 43-per-cent stake, the company is majority-held by British-based BC Partners.
Mr. Crétier, a self-described “sports fanatic” involved in attempts to bring professional baseball and basketball franchises to Montreal, is not about to give up on his dream. Most Quebec entrepreneurs would avoid getting into a public spat with the powerful Caisse, which is seen as a critical partner. Not Mr. Crétier.
He admits that he went to the Caisse this summer seeking financial backing for a potential bid for G4S, but rejected what has been widely reported as a $1-billion offer from the pension fund manager to purchase preferred shares in GardaWorld.
“They never offered to invest in Garda. They offered me debt, on very high terms,” Mr. Crétier says.
He says he ultimately struck a financing deal with a syndicate of banks on better terms. That might have been the end of it had he not next discovered that the Caisse, which owns a 35-per-cent stake in Allied, was backing a rival bid for G4S when it had previously expressed unease with investing the company.
Mr. Crétier says G4S “lost its soul” after Mr. Philip-Sorensen’s death and has wound up mired in one controversy after another – from the alleged mistreatment of inmates at prisons it ran in South Africa to lawsuits over alleged “protection payments” to the Taliban in Afghanistan.
The potential for unflattering headlines has typically deterred pension funds such as the Caisse from investing in the global security business, whose services often include the dangerous practice of guarding diplomats and corporate executives in war-torn countries. But G4S has been especially shunned by leading institutional investors for its alleged violations of ESG (environmental, social and governance) criteria that funds such as the Caisse adhere to.
Mr. Crétier is undeterred by G4S’s controversies, calling it a “fixer upper” whose operations he intends to clean up. GardaWorld has extensive operations in Iraq and Afghanistan, where it has contracts to guard embassies and the offices of several non-governmental organizations. But unlike G4S, Mr. Crétier says GardaWorld applies far stricter ethical codes to its operations.
“It is unacceptable that our pension fund, as proud Quebeckers, is seeking to own a company – through Allied – that is going to own prisons in South Africa, prisons that aren’t exactly vacation camps,” he charges.
Mr. Crétier refuses to say whether he wants the Caisse to get Allied to drop its bid for G4S, though it certainly sounds that way. His charge that the Caisse is undermining a homegrown champion is not one that any politician in Quebec City can dismiss.
Mr. Crétier is, after all, pretty hard to ignore. In little more than two decades, he has built GardaWorld from a tiny outfit transporting cash for Quebec’s caisses populaires into a top-five global security firm with annual revenues of about $3.8-billion. And he is not about to stop now, even if it means taking on the Caisse.
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