Bottom Line: Some strange logic at Securicor

ANYONE investing in the Securicor twins because of their combined 40 per cent stake in Cellnet will have been cheered by the price of recent deals between Nynex and Bell Atlantic.

Such transactions, and comparisons with Vodafone, continue to suggest that Cellnet and therefore Securicor and its twin Security Services are undervalued.

But the logic of the current arrangements looks ever more peculiar. The Securicor twins remain minority shareholders in a business which is generating dividends and cash but over which they have no management control.

Meanwhile, Securicor's management team is seeking acquisitions in the businesses over which it does have control. With only 17 per cent gearing and substantial undrawn borrowing facilities, it is well placed to pursue its ambitions in areas such as logistics and US mobile communications.

Whether Cellnet fans are happy with this is a moot point. After all, the half-time dividend is up by only 10 per cent despite increases in earnings of 33 per cent at Securicor and 43 per cent at Security Services. Last year Cellnet paid Securicor a pounds 14.5m dividend but the group paid out only pounds 2.4m in total to its shareholders.

The case for handing the Cellnet shares over to investors in the Securicor twins looks overwhelming. Then the full benefits of the inevitable bid for the outstanding minority by British Telecommunications will flow through undiluted.

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