Mad Money

Keeping Shareholder Value Secure


So if Cramer’s right, big buybacks could lead to buyouts. He did some research and it turns out that four of the 14 biggest share repurchases – completed in 2006 or proposed for 2007 – resulted in those companies being taken over. Tonight, he’s picking what he thinks are the next three targets from the remaining ten. The first was United Stationer, the second is Brink’s .

Buyout Targets: Brink's

Brink’s bought back 21% of its shares outstanding in 2006 alone. While that isn’t the biggest on the list, the company does have fantastic fundamentals, Cramer says, which is why he chose it above other companies for the show. Case in point: Brink’s is presently paying down debt even as it repurchases a huge part of the company.

This security outfit is among a select group of businesses that Cramer is highlighting tonight because when it announces a buyback it doesn’t just shrink the float – it devours it. A lot of times, publicly traded firms will initiate a buyback while at the same time issuing shares that nullify the effort. Not so with Brink's and friends.

Brink’s actually has two security businesses: armored cars and security alarms. Activist investors are salivating over this company, hoping to either get the company to sell itself or split in two. Pirate Capital owns 8.5% and just made a deal with management to get a seat on the board. MMI Investments increased its stake to 8.3% back in March, and it says the $66 stock would be worth $79 if the business were separate.

Either way, it’s probably a good play, Cramer says. The activists know that the two businesses don’t need to live under the same roof, and that could act as a second catalyst for the stock.

Bottom Line: The size of the buyback at Brink’s, along with the activist investors buying up shares, makes Cramer believe that this one is ready to get taken out.

Questions? Comments?