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Having seen its share price fall ten-fold since 2005 after several profit warnings and continued contract problems, security provider ArmorGroup International (ARG) has been rescued by FTSE 100 security specialist G4S (GFS).

An 80p per share cash takeover has been agreed, valuing ArmorGroup at £43.6 million. Shareholders are likely to accept the offer from G4S, as it provides a quick cash exit from what has been a disappointing investment.

The G4S bid is some way off the 272.5p high seen in ArmorGroup’s share price in April 2005, but it concludes an uncomfortable time for investors. The takeout price is also nearly three times the trading low of 27.5p seen in January 2008.

The junior security group, which specialises in convoy protection, mine clearance and securing training, had a short-lived fanfare after floating in December 2004. It warned in July 2005 that full-year operating profit would be below market forecasts, following contract problems in Iraq and delays in getting new work.

The following year saw a major share price slump after institutional investors Fidelity reduced its stake from 10% to under 3%. In January 2007, ArmorGroup issued another profit warning after failing to attract third party users at its training facility in Iraq.

Much of ArmorGroup’s work is secured via ‘indefinite delivery and quantity’ (ID/IQ) deals. These guarantee the company will carry out work, but there is no firm start date. This structure had brought confusion over anticipated revenues. In 2005, ArmorGroup and two consortium partners won a five-year, $500 million ID/IQ weapons reduction contract from the US Department of State. The City had assumed revenue would come during 2006, but the consortium had still to earn ‘any real money’, admitted the company a year ago.

ArmorGroup set its sights on boosting high-margin specialist training as oil and gas companies entered potentially unstable regions. The acquisition of a kidnap and ransom consultancy proved wise as it gained work in helping to retrieve abducted natural resource workers in places such as Nigeria and the Congo. However, wider African business is being hampered by local competition and being undercut by cheaper rivals.

A contract to provide security services to the UK government in Afghanistan proved disappointing with low margins. The mine clearance and weapons reduction division, however, has fared well with gains in Sudan and Lebanon.

Last week, Armorgroup reported a 55% drop in pre-tax profit to $4.2 million for 2007. A final dividend of 1.5p for the year was declared but this will form part of G4S’ offer.