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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Amendment No.2)*
of
Tweedy, Browne Company L.P.
SCHEDULE 13D
(Amendment No. 2)*
of
Vanderbilt Partners, L.P.
Under the Securities Exchange Act of 1934
PINKERTON'S, INC.
(Name of Issuer)
Common Stock, Par Value $.001 per Share
(Title of Class of Securities)
723429106
(CUSIP Number)
John D. Spears
52 Vanderbilt Avenue
New York, New York 10017
(212) 916-0600
(Name, Address and Telephone Number of Persons
Authorized to Receive Notices and Communications)
JULY 11, 1996
(Date of Event which Required Filing of this Statement)
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If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is paid with the statement [ ]. (A fee is not
required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act,
but shall be subject to all the provisions of the Act (however, see the Notes).
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SCHEDULE 13D
CUSIP NO. 723429106 Page of Pages
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1. NAME OF REPORTING PERSON
S.S. OR I.R.S. INDENTIFICATION NO. OF ABOVE PERSON
Vanderbilt Partners, L.P. ("Vanderbilt")
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) /x/
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3. SEC USE ONLY
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4. SOURCE OF FUNDS*
WC AND BK
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) OR 2(E) / /
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7. SOLE VOTING POWER
7,100 shares, except that the general parners in
Vanderbilt, solely by reason of their positions as
NUMBER OF such, may be deemed to have shared power to vote
these shares
SHARES
------------------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY 0 shares
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EACH 9. SOLE DISPOSITIVE POWER
7,100 shares, except that the general partners in
REPORTING Vanderbilt, solely by reason of their positions as
such, may be deemed to have shared power to vote
PERSON these shares.
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WITH 10. SHARED DISPOSITIVE POWER
0 shares
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7,100 shares
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* /X/
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.09%
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14. TYPE OF REPORTING PERSON*
PN
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* SEE INSTRUCTIONS BEFORE FILLING OUT!
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SCHEDULE 13D
CUSIP NO. 723429106 Page of Pages
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1. NAME OF REPORTING PERSON
S.S. OR I.R.S. INDENTIFICATION NO. OF ABOVE PERSON
Tweedy, Browne Company L.P. ("TBC")
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) /x/
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3. SEC USE ONLY
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4. SOURCE OF FUNDS*
00
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) OR 2(E) / /
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7. SOLE VOTING POWER TBC has sole voting power with
respect to 464,420 shares held in certain TBC Accounts
(as hereinafter defined). Additionally, certain of the
NUMBER OF general partners of TBC may be deemed to have sole
power to vote certain shares as more fully set forth
SHARES herein.
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BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY 0 shares
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EACH 9. SOLE DISPOSITIVE POWER
0 shares, except that certain of
REPORTING the general partners of TBC may be deemed to have
sole power to dispose of certain shares as more
PERSON fully set forth herein.
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WITH 10. SHARED DISPOSITIVE POWER
528,635 shares held in accounts of TBC
(as hereinafter defined)
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
528,635 shares
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* /X/
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.33%
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14. TYPE OF REPORTING PERSON*
BD, IA & PN
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* SEE INSTRUCTIONS BEFORE FILLING OUT!
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PRELIMINARY NOTE
The persons filing this Amendment No. 2 are (i) Tweedy, Browne Company L.P.
("TBC"), a Delaware limited partnership, and (ii) Vanderbilt Partners, L.P.
("Vanderbilt"), a Delaware limited partnership. This Amendment No. 2 amends a
Statement on Schedule 13D filed by TBC and Vanderbilt dated June 10, 1996 (the
"Statement"). The filing of this Amendment No. 2 should not be deemed an
admission that TBC, and Vanderbilt comprise a group within the meaning of
Section 13(d)(3) of the Securities and Exchange Act of 1934, as amended
(the"Act").
This Amendment No. 2 relates to the Common Stock, $.001 par value (the
"Common Stock"), of Pinkerton's , Inc. (the "Company"), which, to the best
knowledge of the persons filing this Amendment No. 2 is a company organized
under the laws of Delaware, with its principal executive offices located at
15910 Ventura Boulevard, Suite 900, Encino, California 91436-2810.
This Amendment No. 2 contains information regarding shares of Common Stock
that may be deemed to be beneficially owned by TBC. Such shares are held in the
accounts of various customers of TBC, with respect to which it has obtained sole
or shared voting power.
Other than as set forth below, to the best knowledge of TBC and Vanderbilt,
there has been no material change in the information set forth in response to
Items 1, 2, 3, 5 and 6 of the Statement, as amended. Accordingly, those Items
are omitted from this Amendment No. 2.
ITEM 4. PURPOSE OF TRANSACTION
Each of TBC and Vanderbilt has acquired the shares of Common Stock owned by
it for investment purposes and for none of the reasons enumerated in Item 4 of
Schedule 13D, except that TBC and Vanderbilt may dispose of all or some of the
TBC Shares and the Vanderbilt Shares, respectively, or may acquire additional
shares of Common Stock from time to time, depending upon price and market
conditions, evaluation of alternative investments, and other factors. Currently,
TBC and Vanderbilt intend to acquire additional shares of Common Stock in the
open market, depending upon the price of the Common Stock from time to time.
On July 11, 1996, TBC sent a letter to the Company questioning
adviseability of the Company's previously announced Common Stock offering. A
copy of this letter is included herewith as Exhibit 99.2 and is hereby
incorporated herein by this reference.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 99.2 - - Letter to Pinkerton's, Inc.
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SIGNATURE
Each of Tweedy, Browne Company L.P. and Vanderbilt Partners, L.P., after
reasonable inquiry and to the best of its knowledge and belief, hereby certifies
that the information set forth in this Amendment No. 2 is true, complete and
correct.
TWEEDY, BROWNE COMPANY L.P.
By
---------------------
Christopher H. Browne
General Partner
VANDERBILT PARTNERS, L.P.
By
---------------------
Christopher H. Browne
General Partner
Dated: July 11, 1996
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{Tweedy, Browne Company L.P. letterhead}
EXHIBIT 99.2
July 11, 1996
VIA FEDEX
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Mr. Denis R. Brown, President
and Directors of Pinkerton's, Inc.
Pinkerton's, Inc.
5910 Ventura Boulevard
Suite 900
Encino, CA 91436-2810
Dear Mr. Brown and Directors of Pinkerton's, Inc.:
We are writing to you on behalf of our clients, who are shareholders of
Pinkerton's, Inc. Tweedy, Browne Company L.P. is a registered investment adviser
and, as such, we exercise investment discretion and/or voting authority for our
clients, who currently own 528,635 shares of common stock of Pinkerton's, Inc.
In addition, one affiliated investment partnership, Vanderbilt Partners L.P.
owns 7,100 shares of common stock. These share holdings represent an aggregate
of 6.42% of the shares of Pinkerton's, Inc. common stock outstanding.
We wish to thank you and Messrs. Wathen, Dailey, Gavin, Hall, Gerald
Murphy, Kevin Murphy, Smith and Webster for serving as directors, and wish to
congratulate management on Pinkerton's excellent financial performance over the
last several years.
We are writing to respectfully request that you reconsider the planned sale
of 1.7 million new shares of common stock by the company. Our analysis indicates
that a sale of shares of common stock by the company at $21.05 (the estimated
net proceeds per share as outlined in the company's S-3 registration statement,
assuming an offering price of $23.25 per share) would result in significant
dilution of value for all shareholders.
In our view, the value of Pinkerton's Inc. is determined by its "EBITA",
i.e., earnings before interest, taxes, amortization, write-down of intangible
assets, other special charges,
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Mr. Denis R. Brown, President July 11, 1996
and Directors of Pinkerton's, Inc. Page 2
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gain from litigation settlements, net, and provision for reserve against
investment. EBITA is the real pre tax income of a corporation before the
deduction of accounting asset-write downs, such as goodwill amortization, that
are unlikely to ever require the use of cash for replacement of the asset that
has been written down. According to the company's S-3 registration statement,
EBITA for the year ended December 31, 1995 was $29,964,000, or $3.59 per share
based on 8,350,269 shares of common stock currently outstanding. As of March 22,
1996, Pinkerton's essentially had no net debt: cash of $43,003,000 exceeded
total debt of $42,850,000. Based on our experience and observations of
acquisition valuations, highly profitable, cash generative, industry-leading
companies similar to Pinkerton's have often been valued at 9x-11x EBITA, plus
net cash, or minus net debt, in acquisitions. Without any assumption of future
EBITA growth, EBITA multiples of 9x, 10x and 11x provide EBITA yields of,
respectively, 11%, 10% and 9% to an acquiror. At an assumed valuation of 10x
EBITA, Pinkerton's would be worth $35.90 per share based on 8,350,269 shares. A
sale of 1.7 million new shares for net proceeds of $21.05 per share is highly
dilutive to your existing shareholders. A net price of $21.05 is only 5.9x
Pinkerton's EBITA of $3.59 per share.
To not be dilutive, Pinkerton's must earn incremental EBITA of $3.59 per
share for each of the 1.7 million new shares that would be issued. On the
estimated proceeds of $21.05 per share, an EBITA return of 17.1% ($3.59 as a
percent of $21.05 = 17.1%) must be earned to avoid dilution. If Pinkerton's
management believes that 17% EBITA returns are available on incremental
investments of capital, it would be better from a financial standpoint for
Pinkerton's to use existing cash or borrow the money at a pre-tax cost of about
5% - 10%. The immediate effect of a sale of 1.7 million new shares of common
stock will be to reduce EBITA per share to $2.98, a 17% reduction from $3.59 per
share ($29,964,000 EBITA / 10,050,269 pro forma shares = $2.98).
At the current market price, $22.75, Pinkerton's could earn a reliable
EBITA return of 15.8% on each of its own shares that it bought back ($3.59 EBITA
as a percent of $22.75 = 15.8%). At current price levels, Tweedy, Browne would
be highly supportive of a stock buy-back program, including a repurchase of the
660,000 shares being offered by existing stockholders. The repurchase of stock
would increase EBITA per share and underlying per share value.
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Mr. Denis R. Brown, President July 11, 1996
and Directors of Pinkerton's, Inc. Page 3
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The sale of 1.7 million new shares at a net price of $21.05 per share also
seems too low in relation to "economic earnings," which is reported earnings
plus after-tax purchase accounting goodwill amortization. We calculate "economic
earnings" to be reported EPS, $1.26, + $.89/share of after-tax goodwill
amortization, or $2.15/share, total. A net price of $21.05 is 9.8x economic
earnings. The S & P 500 Index is about 19x earnings. In our database of 3,064
public companies in the United States with a market capitalization of $200
million or more, only 200 companies, or 7% of the universe, are trading today at
under 9.8x earnings. 93% of the companies are more expensive. The immediate
effect of a sale of 1.7 million new shares will be to reduce economic earnings
from $2.15 to $1.92, an 11% decline (assuming a 6% pre-tax yield on cash
proceeds from the sale of 1.7 million new shares at $21.05, net, and a 35% tax
rate).
In summary, we support corporate actions that increase per-share value and
are opposed to actions that diminish per-share value. We do not see any benefit
to existing shareholders from increases in the number of shares in the "float"
when the effect of a float increase is a reduction in per-share value. Our
experience as investors suggests that Pinkerton's share price is likely to rise
if per-share value increases, irrespective of float.
We believe it would be useful for you and your fellow directors to meet in
one room with some of your largest stockholders (whose interests, we believe,
are not dissimilar to the interests of your smallest stockholders). Would you
and Messrs. Wathen, Dailey, Gavin, Hall, Gerald Murphy, Kevin Murphy, Smith and
Webster meet with us and other large shareholders at our office or another
mutually convenient place before proceeding with the planned share offering? I
will telephone you tomorrow. Thank you for your consideration.
Sincerely,
/s/ John D. Spears
------------------
John D. Spears
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Mr. Denis R. Brown, President July 11, 1996
and Directors of Pinkerton's, Inc. Page 4
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COPIES TO:
- ---------
Peter H. Dailey
John A. Gavin
Gerald D. Murphy
J. Kevin Murphy
Robert H. Smith
Thomas W. Wathen
William H. Webster
<TABLE>
<CAPTION>
% OF PINKERTON'S INC. OWNED
STOCKHOLDERS: ACCORDING TO 3/31/96 13F
- ------------ ---------------------------
<S> <C>
Southeastern Asset Management 10.29%
Putnam Management 5.37%
Neuberger & Berman 5.35%
TCW Group 4.36%
Wood Island Association 2.86%
Morgan Guaranty Trust 2.22%
HPB Associates 1.88%
Quest Advisory 1.56%
BZW Barclays Global 1.83%
Dorchester Capital Corp.
</TABLE>
