Suitor woos Allied Security

Saturday, February 1, 2003

KING OF PRUSSIA, Pa. - A large scale holding firm with a stake in cosmetic company Revlon plans to buy the majority interest in guard service provider Allied Security, a deal that would mark yet another company’s entrance into the security market.

The agreement calls for MacAndrews & Forbes Holding to buy shares owned by Gryphon Investors, an investment company that has owned the largest stake in Allied Security for more than five years, and other outstanding shares. The amount for the all-cash transaction expected to close this month was not released.

James Conroy, senior vice president and special counsel for $4 billion holding firm MacAndrews & Forbes said company officials believe Allied Security has excellent growth opportunities and plan to examine expansion possibilities.

Already the company has a large presence, with clients in 37 states in 2001 and 19,000 employees, of which 18,000 work as security officers.

The deal comes at a unique time for Allied Security, which only months before filed its intentions with the Securities and Exchange Commission to take the company public to raise capital. Finding a new majority shareholder, speculated Jack Mallon, managing partner of Mallon Capital, may have proved more lucrative than an initial public offering.

“It might just be they decided to go this route when they saw they were not going to be able to sell it to the public at a higher price,” said Mallon.

David Andrews, president and managing partner of Gryphon Investors, said a sale to MacAndrews & Forbes was a better financial return for shareholders instead of the initial public offering. “It was a very strong return for all shareholders and Gryphon Investors,” he said.

More than a dozen companies expressed an interest in Allied Security after the company filed its prospectus with the SEC in September, said Andrews. “We received a number of overtures from interested buyers, which we then began to run a parallel process of evaluating those proposals,” he said.

While Gryphon Investors decided to divest its shares in Allied Security, Owen Blicksilver, a spokesperson for Gryphon Investors, said the five-year period it held onto its stake is average compared with most financial investment time frames.

“A financial buyer at some point needs to think about exiting a business,” said Blicksilver, noting that over five years the company has grown from a $75 million small regional player to a $500 million national force. “In terms of the next step, MacAndrews & Forbes is a much bigger player and can really fund the growth to the next level.”

While margins are often low in the security guard market, security industry analyst Mallon said that it’s stable with steady growth. And in today’s post Sept. 11 environment, more capital providers are interested in this market.

“There seems to be an interest by some of the large, private equity firms in the security guard business,” said Mallon, to his surprise. “There’s no high tech, there’s no sexiness. Guards are guards.”