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Tickers in this Article: BCO
Brink's Company (NYSE: BCO) shares have risen more than 20% over the past year on higher than expected profit and revenue, but that isn't stopping two activist hedge funds from trying to get even more out of their investment through a strategic transaction.

Pirate Capital and MMI Investments believe that Brink's shares are significantly undervalued and require a catalyst in order to come to value – which happens to be their specialty! The two proposed four such catalysts to the company's board of directors:
  1. A sale of the company as a whole.
  2. A tax-free spin-off of one of its divisions.
  3. A leveraged recapitalization.
  4. Another significant stock buyback.
Unfortunately, Brink's did not see eye-to-eye with the shareholders and instead decided to pursue an acquisition strategy of their own. This prompted Pirate Capital to consider nominating their own candidates to the company's board of directors in an attempt to takeover of the company.

The hedge fund has yet to file the necessary proxy statements; however, with the annual meeting set on May 4th there is still ample opportunity.

The Big Question: How Much Is It Worth?
Pirate Capital's managing partner, Thomas Hudson, said in early September that the company would attract substantial interest and likely see bids in the $68 to $72 per share range if the company decided to put itself up for sale. MMI Investments' analysis confirmed this conclusion in January of this year, when they said the company would be worth $70 per share or more in the event of a sale.

What about a spin-off scenario? Recently, on April 2nd of this year, MMI Investments released another report on the potential value for shareholders in the event of a tax-free spin-off. The hedge fund's sum-of-the-parts analysis showed that the company could be worth $79 if it took this route.

A stock buyback or leveraged recapitalization would also substantially increase value for shareholders. Even if the company doesn't pursue any of these alternatives, they are still on track for excellent growth if they continue to outperform the market like they have in the past! The downside to owning BCO stock at these levels is minimal.

Let's Get This Done Soon!
The thing that immediately jumped out to us was the fact that Brink's stock accounts for a large portion of both MMI Investments and Pirate Capital's portfolios. Since these hedge funds are expected to make large returns on investment for their limited partners, one has to assume that they would work hard to unlock value in their largest investment.

According to a recent 13F-HR filing with the SEC, Pirate Capital currently holds over $260 million in Brink's stock. This is more than double their next closest holding! While MMI Investments has not yet filed a recent 13F-HR on their holdings, we do know that they hold a sizable stake worth over $250 million.


Combined, these two shareholders account for around 17% of the company's common stock, which gives them a significant voice in company matters. The only thing left to do now is wait to see if the company either bends to the hedge funds' demands or see if Pirate Capital files proxy statements before the May 4th annual shareholders meeting.

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