Argyle top execs resign; company deregisters

In recession era, corrections and commercial firm gets back to basics
Tuesday, April 6, 2010

SAN ANTONIO—Five years ago, Sam Youngblood was happily running his privately owned ISI Detention Contracting when he was presented with a plan: Merge with public holding company Argyle Security and help make it a global, $1 billion security firm. It sounded good at the time.

“It was a booming stock market, there was a craze of growth,” Youngblood remembered, “and the people involved wanted to bring in other large companies—they had huge access to their own capital, and it made sense that they were going to take ISI, which was a $100 million company, and they were going to buy 10 of those, and I was going to be a part of that.”

Here it is the beginning of 2010, however, and Argyle did $110 million last year. “Their access to capital got limited, the stock market got hammered,” Youngblood said, “and here we had the same business I was already running, with no other ones acquired. It just made no sense to be public, and it made no sense to have all this infrastructure in the company designed to make acquisitions.”

Argyle did buy three small companies—Peterson Detention (PDI), installation firm FireQuest, and manufacturer Com-Tec—for a total of $14 million in early 2008—but couldn’t add anything of ISI’s bulk, despite more than $40 million in funding and debt restructuring.

So, changes were made. The original Argyle team, led by executive chairman Ron Chaimovski and CEO Bob Marbut, along with CFO Don Neville and VP and controller Dean Dresser, have resigned, looking for new opportunities. Youngblood has taken over CEO duties and brought on Richard Watts as CFO. And the company has announced it will be deregistering as a public company, something it can do relatively easily as there are fewer than 300 shareholders.

“There’s no reason for us to be public,” Youngblood said, “and now we’re eliminating all that overhead.”

Youngblood pronounces himself reinvigorated, in fact. MML Capital has infused $11 million into the company and encouraged Youngblood to focus on organic growth and creating synergy among the company’s five divisions: ISI Detention Contracting, Metroplex Control Systems, Com-Tec, and PDI, which all serve the corrections industry; and MCS Fire and Security, a roughly $35 million commercial integration business.

The Argyle name has never been customer facing—just a holding company known to the SEC and investors—and it will stay that way, as the company refocuses on strengthening the market presence of those five market-facing divisions.

“This is very much like I ran the business for 18 years before I merged with Argyle,” Youngblood said. “We’re going back to the basics of working with our customer base, and I’m extremely excited about that. And we’re taking some of the strong technological synergies we have across the divisions and combining them and swapping them into our different markets, which is something we never had time to look at before because we were looking at acquisitions. So we’re increasing our own margins by consolidating the different business units. I’m going back to what I know. I believe in that vision.”