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Unlocking The Treasure In Brink's


Is security king Brink's (BCO) on the verge of being sold? Its stock rose from 48 in February to 55.25 on Aug. 23, spurred by demands from activists that it be put up for sale. Pirate capital, the largest shareholder, with an 8.7% stake, said in an Aug. 9 letter to the board that the stock didn't reflect the full value of Brink's businesses or their "stable cash flow." CEO Michael Dan replied that the board will "seriously discuss" the matter. A spokesman declined to say when. Three other large stockholders, MCM Management, Steel Partners, and Fidelity Investments, who together control a further 23.9%, agree. "There's no doubt Brink's is undervalued," says Clay Lifflander, president of MCM, which owns 8.2%. While Pirate values Brink's at 68 to 72, Lifflander says it's worth 80, based on projected 2007 earnings before interest, taxes, depreciation, and amortization (EBITDA). He doesn't expect the board to "sit on its hands and let Brink's languish." He thinks private equity funds would be attracted to its cash flow. Michael Hoffman, managing director at Friedman Billings Ramsey Group (FBR), rates Brink's, with a market cap of $3 billion, as "outperform." Strategic buyers, he says, could include General Electric (GE) and United Technologies (UTX). Both refused to comment on market speculation.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial


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