The Brink's Company (NYSE:BCO) is again under pressure from dissident shareholders to unlock value through a strategic transaction. MMI Investments disclosed an 8.3% stake in the company today and recommended that the company pursue a tax-free spin-off of one of BCO's two business segments to create value for shareholders. MMI, along with other shareholders, believe that Wall Street has perpetually undervalued the combined enterprise despite all the changes of the past few years, BCO's premier brands, and its best in class operating model in both monitoring and cash-in-transit. Based on a sum-of-the-parts analysis, MMI believes that the potential value to be created via a tax-free spin-off could mean a $79 per share valuation - a 25% premium to the current stock price.

MMI Investments believes that a spin-off is the best option since the move would align the company with the increasingly specialized comparables universe (ie. Securitas Direct, Protection One, Loomis, Tyco) and enable the company to retain tax-free treatment without inhibiting other value-enhancing options. The hedge fund also believes there are several business reasons for the spin-off, including;

• BHS and Brink's have different cash flow and capital investment requirements
• Both entities would benefit from separate access to equity and debt capital markets
• Potential for a higher valued equity currency to compete in the highly competitive M&A market
• Management of each entity would have the opportunity to focus exclusively on their distinct businesses
• Employees could be incentivized through stronger equity compensation plans more closely aligned to the performance of their business

Indeed, the company's 10K already suggests that BHS and Brink's Inc. are two separate subsidiaries, while the two entities do not even share facilities in any significant way. Moreover, if the spin-off were to take place, the two resulting companies would both have market capitalizations of approximately $1.5 billion or greater - more than enough for public company critical mass. So in the end, there is little reason not to pursue such a strategic transaction, as it would greatly enhance shareholder value and provide the company with greater flexibility. Combined, this situation makes BCO a stock worth watching!

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