Pinkerton's Inc., the storied but troubled security company whose agents once guarded Abraham Lincoln and hunted down such notorious outlaws as Butch Cassidy and Jesse James, said Monday that it has agreed to be acquired by Swedish concern Securitas for $384 million to form the world's biggest security services firm.
Westlake Village-based Pinkerton's would become a subsidiary of Securitas. Both companies would operate under their present names. Together, the companies would have annual sales of $3.5 billion and 5% of the global security services market.
"They recognize the value in a great old brand name," said Denis R. Brown, Pinkerton's president and chief executive. "We will still be known as Pinkerton."
Under terms of the agreement, Securitas would buy Pinkerton's outright, paying $29 for each Pinkerton's share, a rich premium over Friday's closing price of $16.88. News of the deal sent Pinkerton's stock surging $11.69 to close at $28.56 on the New York Stock Exchange.
For the Record
Los Angeles Times Wednesday February 24, 1999 Home Edition Business Part C Page 3 Financial Desk 4 inches; 137 words Type of Material: Correction
Pinkerton's Inc.--Due to an error in information provided by Bridge Information Systems, a chart in Tuesday's edition about the stock price of security services company Pinkerton's Inc. was incorrect. The information, which tracked the Westlake Village company's stock over a two-year period, should have been adjusted for a 3-for-2 stock split in 1997. The chart should have showed the stock price rising in 1997.
Pinkerton's, which agreed to merge with Securitas of Sweden on Monday, reported net income for the quarter ended Dec. 25 of $4.3 million, or 34 cents per share, on sales of $314 million, compared with net income of $6.7 million, or 50 cents, on sales of $316 million in the year-earlier period. For 1998, Pinkerton's reported a net loss of $463,000, or 4 cents per share, on sales of $1 billion, contrasted with net income of $14.7 million, or $1.12, on sales of $1 billion in 1997. Net loss for the year included a writedown and other special charges totaling $9.9 million.
Analysts said the deal seems to make financial and strategic sense for both companies at a time of growing consolidation in the global security services industry.
At the same time, Pinkerton's has been in difficult financial straits over the last year--in fact, it reported a $463,000 loss for 1998 on sales of $1.1 billion--and many analysts say it was ripe for a buyout. The company struggled with several recent acquisitions here and abroad and was having trouble moving into the electronic security business.
"Pinkerton's is an example of a company that was dead in the water," said equity analyst Lincoln A. Werden of New York's H.G. Wellington. "They had a stock that was undervalued . . . and Securitas saw that and decided to go for the deal."
Pinkerton's is perhaps the most well-known security firm in the U.S., with a history dating to 1850, when the company was founded in Chicago by Allan Pinkerton. Known to historians as the original "private eye," Pinkerton at one point was a security advisor to Lincoln and the Union Army. (Pinkerton was no longer working for Lincoln by the time of his assassination.)
The company became one of the largest security firms in the U.S., one with a colorful history.
The company's detectives chased Butch Cassidy and the Sundance Kid in the late 19th century. It was instrumental in putting an end to illegal wiretapping that threatened to cripple financial markets after the Civil War. One former detective, Dashiell Hammett, penned "The Maltese Falcon," helping create the literary genre that focused on the exciting but rough-hewn life of the detective.
By the 1940s, though, Pinkerton's began to de-emphasize detective work, focusing instead on guarding property. By the 1980s, more than 98% of the company's business came from contracts to provide security guards. Almost all worked without guns, a move meant to curb rising insurance liability that would have been quite a shock to old-timers like Hammett.
In 1988, after close to a decade of flat sales and little growth, Pinkerton's was taken over by security maven Thomas Wathen.
Wathen guided the company until 1994, when he stepped down as chief executive and became chairman. He holds an estimated 3.7 million shares of Pinkerton's stock, and under terms of Monday's deal he will liquidate his holding and will no longer be involved with the company, according to Brown.
Brown, who will take on the added duty of chairman once the deal is completed, said the merger will expand the company's presence in Europe while giving its Swedish partner a foothold in North America, South America and Asia.
In Europe, Securitas will take over Pinkerton's security businesses, currently operating in seven countries. Pinkerton's officials, however, stressed that they will continue to run the investigative wing of the company in Europe.
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Pinkerton's at a Glance
Monthly stock closes and latest on the New York Stock Exchange:
Headquarters: Westlake Village
Ticker symbol: PKT
Locations: More than 250 worldwide
Description: Provides contract security and security-related services.
Founded: By Allan Pinkerton in 1850 in Chicago as a private police force that could chase criminals across county and state lines.
Chairman: Thomas W. Wathen
1998 sales: $1 billion
Sources: Bridge, Bloomberg News