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Better strategic alternatives for MMI hedgefunders?

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Wednesday, January 25, 2012

Remember MMI Investments? I haven’t written about this NYC-based hedge fund in a while, but it appears that its principals have found some new, more attractive strategic alternatives to this NYC-based hedge fund.

Rueters reported this past weekend that MMI Investment principals Jerome Lande and Clay Lifflander were divesting stock and moving on.  I called Jerome Lande today to confirm and find out where he and Lifflander are headed and what they think about investing in the security industry--but he has not returned my call.

Lande and Lifflander, who had this profile written about them by Forbes a few years back, teamed up with Thomas “surrender the booty” Hudson of Pirate Capital to get Brink’s to split into two companies. (Well maybe it wasn’t an official team-up, but all of these hedgefunders were working for the same thing—“enhancing shareholder value” by getting Brink’s to separate the cash handling business from the home security business.)

In this case, Lande and Lifflander were successful. Both Pirate and MMI were Brink’s stockholders—and eventually board members who successfully agitated for the “review of strategic alternatives” back in 2008, which led, eventually to Brink’s splitting into the cash-handling business and Brink’s Home Security. The rest is history: BHS then renamed itself Broadview Security  and seven months later was purchased by ADT

Pirate’s ship sunk pretty quickly after the Brink’s deal, though there was word last year that Hudson may be getting back into the hedge fund business.

According to this report and others, MMI had some other investments in the security industry: notably Checkpoint Systems and Kratos Defense and Security.   Those investments didn’t work out so well.

From Rueters: “The activist fund had a mixed track record in its investments last year -- which typically involved taking a minority stake in companies and urging them to consider a sale.
Last summer, MMI amassed a near 10 percent stake in Kratos Defense & Security Solutions (KTOS.O), spurring a strategic review by the company that did not result in any deal.
MMI also failed to convince the board of Checkpoint Systems Inc (CKP.N) to explore strategic alternatives.”

I haven’t had a chance to scour SEC documents, but Bloomberg in August 2011 did report this about Kratos doing a casual exploration of a sale.

 “Kratos Defense & Security Solutions, Inc. is seeking potential buyers with the help of a boutique investment bank, two industry sources told deal Reporter. It is not clear whether Kratos has officially hired a financial advisor. Kratos Chief Executive Officer Eric DeMarco said: "Our policy is not to comment or discuss strategy or strategic alternatives." MMI Investments, L.P., holding 8.6% stake, said that Kratos' competitive advantages and growth prospects are greatly undervalued by its share price. "This undervaluation is unlikely to improve on a sustainable basis while [Kratos] remains an independent public company. Therefore, the reporting persons may engage in discussions with members of management and the board of directors of the issuer regarding strategic alternatives to maximize value," said MMI.”

And here’s part of an August 2011 Bloomberg report on MMI’s attempt to get Checkpoint to review its strategic alternatives.
“MMI Investments, L.P., a shareholders of Checkpoint Systems, Inc. (CKP) has asked the Board of Directors of CKP to conduct a comprehensive review and decide strategic alternatives to maximize value for all shareholders, including a sale of CKP as it is significantly undervalued given its strong products, technology, market positions and customer relationships. MMI Investments has also asked CKP to hire a banker for the purpose and explore strategic alternatives.”

iControl/Time Warner Cable sell home security/home automation together

iControl: Telecoms good partners because they are ‘very, very focused’ on the space
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01/10/2012

PALO ALTO, Calif.—Software provider iControl Networks this week announced a new partnership with Time Warner Cable, in which Time Warner’s IntelligentHome security and home automation solution is being powered by iControl software.

When background checks aren't enough

Door-to-door security sales rep charged with rape and attempted murder, but company who hired him says it had no information showing he was threat
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01/04/2012

KNOXVILLE, Tenn.—SecureWatch, an ADT authorized dealer based here, takes steps to make sure job applicants don’t have criminal backgrounds—such as paying a top-notch company to do background checks on them and searching the Internet for information about them, said company COO Paul Victor.
So the company was stunned to learn that a brand-new door-to-door sales rep it had hired—who Victor said had checked out clean—now stands charged with rape and attempted murder while on the job in Tampa, Fla.

'Mixed' court ruling in Illinois monitoring case

An appeals court says public entities in the state can monitor fire alarms but can’t displace private companies from market
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12/01/2011

CHICAGO, Ill.—A federal appeals court based here says public fire districts in Illinois have a legal right to be in the fire alarm monitoring business, but can’t displace the private fire market in doing so.

Telecom partners with professional security companies in second go-round

After going it alone in beta, Frontier decides partnering with big national security companies is the way to go
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12/01/2011

STAMFORD, Conn.—Frontier Communications about four years ago tried a go-it-alone experiment offering home security in a small town in Pennsylvania. The telecom, based here, did everything from marketing the product to monitoring it through a third-party monitoring center.
Now Frontier is taking a different approach in a second foray into the security market: It’s partnering with two security giants, ADT and Protection 1, to offer security products in two separate six-month trial programs, one in upstate New York and one in Pennsylvania.

Time Warner Cable, Frontier enter home security market

The companies launch home security/home automation options in upstate New York and other markets
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11/22/2011

YARMOUTH, Maine—Time Warner Cable and Frontier Communications are now joining other cableco and telecom companies in launching home security/home automation offerings.

Tyco post-split talk Part II: Are acquisitions in the air?

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Thursday, November 3, 2011

Here’s Part II (I posted Part I yesterday) of a blog with some Tyco post-split details, which I found in the process of reviewing the Tyco International Conference Call. The call took place on the day that Tyco announced its plan to split into three publicly traded companies.

On that day, most of the industry, including yours truly, was running around the ASIS show floor. The quotes below are courtesy of Seeking Alpha.

Was the split construed to ready Fire & Security or ADT for acquisition? And, is there any government regulation that would preclude the acquisition of ADT or Commercial Fire and Security from taking place in the next 18 months?

Asked if Tyco had “not had substantive conversations with any outside parties about the sale of any of these businesses?” Tyco CEO Ed Breen said: “We are well aware of the laws and regulations out there and … we are very careful about what we do. So I will leave it at that.”
 
OK, well is there anything to preclude one of the entities from being acquired in the next 18 months?
“If anyone approaches us about a piece of the … our Board would have to take that under advisement. It is our fiduciary responsibility, but it is not our plan. Our plan is to get these out there on their own and let them play in the their industry,” Breen said.

Answering a question on a different topic, Breen said: “I’m a big believer that there going to be consolidation in these industries. I think you’ve already been watching some of that occur and we want our businesses to be able to play in that environment in their respective industries.”

Asked about the split between resi and commercial security, Breen said much of the separation has occurred already, when ADT split into residential and commercial divisions.

And, in terms of the monitoring operation, Breen said they have a plan about how to separate the two and “it’s easier than it sounds.”

Whey didn’t they bifurcate the two businesses back in 2006? The companies were too fragmented at that time, Breen said. “The management teams were more fragmented and there wasn’t consistent performance.”
 

Vector: National accounts in play; we want them

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Thursday, October 6, 2011

Vector Security says national accounts customers are “in play” due to acquisitions and corporate break-ups. And, Michael Grady, Vector Security’s EVP told me, in an email interview that Vector is poised to expand its national account business for a number of reasons: Vector is still privately owned and it has money in the bank (something Vector president Pam Petrow talked to me about recently when Vector got a new $225m credit facility.)  Also in Vector’s favor, he said, is its move, announced Tuesday to a new National Service Center in Gainsville, Va.
The new facility is about 10 miles away from its former facility in Manassas, Va.
Grady said that there’s a “hyper consolidation” in the loss prevention industry similar to what happened in 2001. Further, he said, “companies that have long established histories of serving national customers are today literally ‘in play’ again, due to factors such acquisitions and corporate break ups. That always creates doubt in customers, but this time, they only need to look back ten years.  So those who are really concerned and indeed recognizing a trend here ... and that bodes well for Vector Security because of our high level of corporate independence and stellar financial stature.”
Last year, I interviewed Vector’s VP/GM for national accounts Joe English, who told me that Vector expected to take retail national accounts market share from ADT. He said ADT had about 50-55 percent of the market, and uses the same AM EAS technology that ADT uses.  He said his goal is to “make [Vector] the predominant number three player in the EAS industry.” He further said that Vector expected to do about $75 million in national accounts business in 2010.
Grady declined to give me revenue figures for 2011 or gains in marketshare figures, but he did say that “As far as our sales figures last and this year, we experienced strong growth in 2010 and the trend is continuing in 2011.”
Vector’s new National Service Center is 27,000 square feet, has 130 employees who are involved with “Project Design and Coordination – Field Installation - our National Service Center – National Compliance Management – Billing – Engineering – TSP Recruitment and Management – Product Testing and Evaluation – our CRM department and Equipment repair.”
The center has a Virtual Loss Prevention Services Lab, which Grady described thus: “As our national account customers look towards newer and innovative technologies to resolve loss prevention, emergency communications, systems performance and ROI measurement, disaster preparedness, RFID applications, LP case management, managed EAS, IP video and analytics, and Network Management, we wanted to construct an environment whereby we can bench test the equipment itself, define new applications and compile ROI data. This facility allows us the technological platforms, space and environment to do so.”
The new facility is set up to enable Vector to service video, access, and EAS equipment onsite. Previously, “like most LP services providers, we sent malfunctioning equipment back to manufacturers and arranged for it to be repaired and sent back to us. But as we took on large-scale deployments of video and EAS equipment, we found that model to be unacceptable to our CRM commitments,” Grady said.
Testing new equipment will help the company stay on top of new LP protocols—both best practices and government regulations, Grady said. “It could mean New protocols such as SOPs, new product applications,  adherence to national compliance, and reliance upon exceptions based instantaneous information are required to be managed and even anticipated from our national customers based upon changes in the nature of crime, employee theft, shoplifting and even litigation such as slip and fall and insufficient security suits.”

And Vector is not solely interested in retail national accounts. "While most earlier national account models were built upon the vast expansion of retail, our key defining element for likened customers is 'multi-site' with a need to control security, loss prevention and employee safety on a national basis," Grady said. "Today, all types of services; that were performed previously by local purveyors, and being targeted by national suppliers.  The “Doc in a Box” in and out treatment center was just one area of the new entries in the market. There are many more to come."
Vector has national accounts customers in 44,000 locations. The company says it receives 26,000 service calls per month, all of which are qualified, and result in about 4,000 qualified service visits. Those service calls are resolved in an average of 2.6 days. All of Vector’s national accounts are monitored at Vector’s central station in Pittsburgh.
 

Courts side with alarm industry in Illinois

Efforts by public entities to monopolize fire alarm monitoring suffer setbacks in recent rulings
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10/04/2011

ARLINGTON HEIGHTS, Ill.—Two court decisions in late August bolstered the alarm industry’s position in an ongoing dispute in Illinois over public entities taking control of fire alarm monitoring away from private companies.

Provident hires new developer

SSN Staff  - 
08/22/2011

VANCOUVER, B.C.—Provident Security on Aug. 20 announced it has hired Bob Stevenson as lead developer.

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