Prosegur (XMCE:PSG), a Spanish and Latin American provider of cash-in-transit and security services, announced in late September that it intends to conduct an initial public offering of its cash-in-transit subsidiary. The purpose of the exercise is several-fold. First, the company is of the view that placing an independent value on its cash-in-transit business is likely to result in an increase in the value of Prosegur as a whole. Second, Prosegur is in the early days of building a formidable alarms business in Latin America. The characteristics of the business are such that it requires meaningful up-front capital investment to acquire and equip new customers but tends to require little ongoing capital investment as revenue is generated for years thereafter, conceptually similar to many cable or telecom businesses. The idea is to make the up-front capital investment and then enjoy long periods of prodigious cash flow. A portion of the proceeds from the cash-in-transit initial public offering will be used to accelerate the development of the alarms business. Finally, Prosegur intends to distribute a considerable portion of the offering proceeds to shareholders. Prosegur's share price reacted strongly to this proposed plan.
From the Third Avenue International Fund third quarter 2016 commentary.
