Argyle secures $15 million in financing
SAN ANTONIO--Systems integrator Argyle Security announced April 24 it has received a $15 million stock investment from Mezzanine Management, an independent investment firm. Argyle will issue roughly 18,750 shares of preferred stock, with each share convertible to 100 shares of common stock at $8 a share. That represents a premium of more than $1 over where the stock is currently trading.
"I can't tell you how excited we are about this," said Bob Marbut, chairman and co-CEO of Argyle Security. "Even if the environment weren't as tough as it is, it's great to be able to find this kind of partner and do something that's substantial for us and on terms that are good for the shareholders." Mezzanine did not ask for dividends to be paid out, and "the fact that they came in at $8, and no one else has come in above $8 in the whole time we've been a company, our other major shareholders were ecstatic about that."
Argyle has been an active acquirer since beginning operations in July 2007, having most recently bought Peterson Detention, FireQuest, and Com-Tec Security for a total of roughly $14 million in January. In the fourth quarter of 2007, the company reported revenues of $26,961,000 and $235,000 of net profit. This early profitability is what attracted Mezzanine, Marbut said.
"When you think about a company at this stage, even in a reasonably good environment," normally you'd bring in partners at a discount, Marbut said. Instead, Mezzanine "is a growth strategy support partner," he said. "If we weren't growing, we wouldn't have needed it." He said having a strong balance sheet, which was helped by the financing, is important for the company's corrections work, where a strong balance sheet is necessary for bonding capacity, and "it gives us equity that we can use ... for some likely acquisitions later in the year, perhaps. We've identified cities that we want to continue to grow in with our commercial side of the business."
Argyle Security, Inc. currently has two reporting segments: Argyle Corrections and MCS-Commercial. Argyle Corrections is the controlling entity for ISI-Detention, PDI, Com-Tec and MCS-Detention. Argyle Corrections Group is one of the nation's largest providers of detention equipment products and service solutions, as well as turnkey, electronic security systems.