Pirate predicts Brink's sale within year
NORWALK, Conn.--Thomas Hudson's recent appointment to The Brink's Company's board of directors has not quelled his desire to see the company put itself up for sale, in fact he foresees "material progress toward the sale of Brink's within 12 months."
"Not only is [the sale of The Brink's Company] still our goal, now that I'm on the board the likelihood of a transaction just multiplied ... It's a lot easier [to get things done] on the inside," he said.
The Brink's company announced Feb. 8 that Hudson, who is manager of Pirate Capital, a $1.7 billion hedge fund that owns 8.5 percent of Brink's stock, would be named to its board of directors. Further, Hudson will serve on three board committees, including the strategy committee, which he said is "just as important, if not more important, than joining the board."
Asked if The Brink's Company had changed its current business plan with the appointment of Hudson to the board, Brink's spokesman Ed Cunningham, said, "There is no news regarding our strategy. Brink's has two world-class security businesses and a very powerful brand. Our focus is on supporting the growth of these businesses as we explore opportunities to leverage the Brink's brand into new security-related markets." He continued, "We welcome Mr. Hudson to the board, and look forward to his contribution to the board's continuing efforts to create additional value for all of our shareholders."
Industry analysts have said that there are certainly buyers for Brink's Home Security, but there are not a lot of buyers for the armored trucking division of the Brink's Company. Hudson acknowledged that though there are some barriers to entering the cash-handling business, there are buyers who are very interested in "getting a hold of the Brink's name," which Hudson calls a "phenomenal brand name and number one when you think of safety." He said he's "gotten phone calls from people interested in buying" the armored trucking business and that there is "a robust market for both businesses," likely from "strategic buyers," such as private equity players.
Brink's CEO Michael Dan has discussed expanding Brink's Home Security's commercial business (first launched in May 2006) through acquisition. Hudson said that the present management "has not exploited the opportunity" in the commercial market, but that "in '07 it needs to do something to close the valuation gap for shareholders ... not go out and start a commercial business."
An expansion of Brink's Home Security's commercial segment is likely to happen--perhaps through a merger--after the sale of Brink's Home Security, Hudson said.
How might the sale of Brink's affect BHS dealers across the country? Hudson said, "Who the actual owner of a business is doesn't impact the day-to-day operations" in a significant way.
However, having hedge funds like Pirate involved in the security industry may mean a better run business, he said: "Having a hedge fund around forces a company to look at alternatives rather than the status quo." In his own case, adding "new blood to the board" will shake things up in a good way, he said.
"In many cases there's a CEO who's been around for a long time and a board of directors that rubberstamps what the CEO wants," Hudson said. The bottom line is that "corporations exist for the benefit of the shareholders and it's imperative that the directors pay attention to that. As long as that chain is followed," he said, "having a hedge fund around will mean a better run company."
Hudson, who currently serves on five boards and one non-profit agency, said outsiders can take a look at a business and help ensure that "it's operating as efficiently as possible."
In response to Pirate's claims that Brink's stock is undervalued, security industry analysts have pointed out that shares of Brink's are up 32 percent over the year and are selling close to their 52-week high at $60-plus per share. Hudson countered that the stock began to rise after the Dec. 2005 sale of its freight unit, BAX, for $1.15 billion. When BAX was first put on the market "no one had any idea if would sell for what it did" he said. The stock is still discounted, he said, and "the only way to get rid of that is through a sale."
As part of the agreement between Brink's and Pirate, Hudson has agreed that he will not conduct a proxy solicitation or campaign concerning election or removal of persons from the board until June 1, 2008 or the 2008 annual shareholder meeting, whichever comes first. After this date, however, all bets are off, Hudson said.
"The vocal opinion of the shareholder base of this company is they want it sold," he said. After the agreed upon date, another major shareholder--possibly hedge fund MMI or another shareholder (see "MMI tells Brink's to sell" in the December 2006 issue of Security Systems News)--could run a slate of directors for the board, Hudson said, "and I will be free to vote as I choose."