Pinkerton’s Going Public to Ease Debt
About 378 private eyes will go public when Pinkerton’s Inc., the best known security firm in the nation and one of the biggest, has its first public stock offering.
About 2 million shares will be offered to the public at $15 per share, with about $10 million of the proceeds going to Pinkerton’s owner, Thomas W. Wathen. The remaining $20 million is intended to reduce Pinkerton’s sizable debt. In 1988 Pinkerton’s was acquired in a leveraged buyout by privately held California Plant Protection Inc. of Van Nuys, which renamed the combined business Pinkerton’s.
The stock offering will give Pinkerton’s a market value of about $83 million, and Wathen’s remaining 64% stake a paper value of $53 million.
Pinkerton’s, which employs more than 39,000 security guards, was founded in 1850 by the legendary private detective, Allan Pinkerton. Pinkerton coined the company’s motto, “We never sleep.”
Since Wathen took over Pinkerton’s, he has struggled to make interest payments on the $95-million takeover of the firm, according to a filing with the federal Securities and Exchange Commission.
The documents offer the first peek at the heretofore private company’s finances.
Last year Pinkerton’s derived about 98% of its $605 million in revenues from providing security guards; the rest came from detective work. The company posted net income of $6.32 million in 1989, compared to a net loss of $592,000 on sales of about $650 million in 1988.
That marks a turnaround of sorts. When Wathen’s California Plant Protection bought Pinkerton’s from American Brands two years ago, the venerable security company was losing money. Pinkerton’s lost $11.2 million in 1987, mostly because it tried to increase its revenues by bidding low on security contracts.
But Wathen has cut costs. He bet that the combined companies’ cash flow would be enough to bring down its debts. In fact, Pinkerton’s had to borrow another $20 million in December, 1988, to keep up with its loan payments.
Last year, Pinkerton’s cash flow was enough to pay its interest on its debt. The company plans to use 85% of the proceeds from the stock offering to reduce its debts, which now total $76.5 million.
Even after the stock offering, though, Pinkerton’s said, it “will continue to be highly leveraged and have very little financial or operational flexibility.”
Last November, Pinkerton’s filed suit against American Brands, claiming the company misrepresented Pinkerton’s finances before the takeover and seeking $40 million in damages. When Pinkerton’s goes public, it will mean some changes in the way Wathen has run the company as a private concern. According to the SEC filing, “all future loans to company officers . . . will be made for bona fide business purposes.”
