Brink's shareholder says, 'Spin-off now'

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Saturday, September 1, 2007

NEW YORK--Citing Tyco's recent successful spin-off of its health care and electronics divisions, major Brink's shareholder MMI Investments on July 11 again urged The Brink's Company to do a tax-free spin off of either Brink's Home Security or its armored truck division, Brinks Inc.
In a letter to the Brink's board of directors, MMI's Clay Lifflander noted that the new Tyco (which he said derives 60 percent of its EBITDA from security company ADT) "trades at 10.2x calendar 2007 EBITDA versus BCO [The Brink's Company] at 6.6x."
He continued, "Our concerns now extend beyond maximizing BCO's value--we fear that the public markets are passing BCO by, to the potential detriment of all its shareholders."
MMI, which owns 8.3 percent of Brink's shares, sent a similar letter to the Brink's board on April 2 (search "Brink's investor urges subsidiary spin-off" at www.securitysystemsnews.com). Jerome Lande, MMI system portfolio manager, said it's "only now [after the Tyco spin-off] that we see how the public market values a pure-play security monitoring company--extremely richly. This is a new and crucially important data point."
The July 11 letter, part of an amended 13D SEC filing, included an updated analysis of a split of the company. Lifflander said MMI continues to believe that the value of the split up would be worth more than $79 per BCO share.
Ed Cunningham, Brink's company spokesman, confirmed that the board had not responded to the letter as of July 18. "We evaluate our strategic alternatives on a regular basis and will continue to do this." At the Lehman Brothers Global Services Conference on June 7, Robert Ritter, Brink's chief financial officer and vice president said the 2008 goal for Brink's Home Security, which has 1,125,000 mostly residential subscribers and $33.1 million in monthly recurring revenue, is to grow "10 percent or better in both revenue and profit."
He also reiterated the company's intention to do commercial security acquisitions. Brink's has looked at companies "as diverse as systems integrators dealing with banks ... that's the type of thing we would actually like to be in because it plays to our monitoring capabilities, our service capabilities and also the customer base we have on the CIT side [cash in transit--the armored trucking division]."
Asked how MMI would feel about this type of acquisition, Lande said, "we've always been supportive of the company's stated intent to grow through acquisitions on a prudent basis. But they've let several strategic acquisitions slip through their fingers during the many years they've been on this hunt, because of undue conservatism and their tendency to be paralyzed by the analysis of a potential deal."
He cited specifically the sale of HSM to Jim Covert and then subsequently to Stanley Works. Brink's "continues to sit on their hands while the competition acquires, divests, spins-off, splits up, and in turn creates higher valuation for their shareholders."