Is a Securitas/Niscayah reunion imminent?

STOCKHOLM, Sweden—Is it strange that guarding giant Securitas, which divested itself of its systems integration business (Securitas Systems, now Niscayah) five years ago, this week made a bid to buy that very same business back?

It may be an unusual situation, but it's a deal that makes a lot of business sense for both Securitas and Niscayah, Imperial Capital's John Mack told Security Systems News. And it's a deal that Mack predicted is likely to get done.

“You can see the rationale,” Mack said. “Niscayah, on its own, hasn't achieved the higher valuation it had hoped for ... and it's attractive now because the price is not that high.” And Securitas made the decision to divest Niscayah at a time “where they didn't see the evolution of the market,” he added.

That evolution is the trend toward the combined offering of guard, monitoring and systems integration services. The trend is well illustrated by G4S, a huge guard company that bought up Adesta and other systems integrators and now offers combined guards, monitoring and systems integration services.

Securitas AB on Monday made a $907 million public offer for Niscayah Group AB. Published reports say the offer is one Securitas share for every 4.19 shares in Niscayah.

The Wall Street Journal reported that “the acquisition is expected to be accretive to earnings per share from 2013, and [Securitas] estimates that the acquisition will create cost synergies of approximately SEK200 million annually. Securitas also said it expects restructuring costs to amount to SEK250 million in 2011 and 2012.”

Niscayah shares rose 29 percent, just above bid level, and Securitas shares were down 4.3 percent on Monday after the announcement.

According to several reports, including one in the Wall Street Journal, Securitas CEO Alf Goransson said during a Monday press conference that divesting Niscayah was a mistake.

In a May 4 statement, Goransson said: “We continue to pursue our strategy of specialization and segmentation, strengthening our capabilities in technology and added value tools and services, and to selectively make acquisitions in mature and new markets with the target to be present in approximately 60 countries within three years.”

He also acknowledged, in that statement, that contract losses “have been exceptionally high in the first quarter and are consequently causing a negative impact on the operating margin. Actions are taken to improve the situation, short term as well as in longer term.”

Niscayah announced on Monday that it has appointed an independent committee, consisting of board members Tomas Franzén, Eva Lindqvist and Håkan Kirstein, to evaluate the offer and make a fairness decision by July 4.

Securitas has said that Niscayah's largest shareholders—Latour, SakI and MSAB—support the offer, according to published reports. The deal would need shareholder approval.

Should the deal go down, what would this mean for Niscayah's North American operations? Mack said that he “wouldn't be surprised” if part of the strategy is to invest significantly in growing Niscayah's operations in North America.

“Niscayah has wanted to create a bigger position for itself in the North American market for years. It's made small regional acquisitions but hasn't stepped up to do something of a bigger size,” he said. “I wouldn't be surprised if part of Securitas' vision is to make a more aggressive move to grow the North American part of the business.”