10/10/2008Another Photo Enforcement Company Buyout Possible
Investment firms look to buy out Australian photo enforcement company Redflex.
An investment firm may buy out another major provider of red light cameras and speed cameras. Redflex Traffic Systems, based in Melbourne, Australia, operates about one-half of the photo enforcement devices in the United States. The company announced today that it has been approached by unnamed suitors carrying generous offers.
"In recent weeks, Redflex has been approached by several parties expressing interest in acquiring 100 percent of the issued capital of the company," a release to Australian Securities Exchange investors stated. "The board has now received multiple nonbinding indicative proposals from credible parties to acquire the company at indicative values in excess of $3.50 per share."
As late as Wednesday Redflex stock had been trading at just A$2.17 (US $1.43) a share. The potential to be paid more than the 52-week high for a share in the company caused the stock to close today at A$2.80 per share, up 27 percent. Redflex hired Gresham Advisory Partners to review the proposals to determine whether selling the company, which has a market capitalization of A$253 million, would be in the best interest of the board of directors. The buyout offers follow last month's announcement that Goldman Sachs had acquired a minority stake in photo ticketing rival American Traffic Solutions (ATS). It also follows the announcement of massive growth in the US market for the Redflex product.
"Again, new records have been set by substantial margins in relation to all standard measures of financial performance," Redflex Chairman Christopher Cooper wrote in the company's 2008 annual report which was released last week. "Between the start and finish of the financial year the US dollar declined in Australian dollar terms by approximately 13 percent. That being the case, the financial records established by Redflex are all the more commendable."
Redflex saw an increase of 43 percent in traffic ticket revenue from the United States, driven primarily by an increase in the total number of ticket cameras installed from 877 to 1267. The demand for more cameras has increased as local jurisdictions continue to feel the pinch from the financial crisis. As home values continue to decline, property tax income likewise falls off, leaving cities and counties struggling to find money to fund expensive new social programs.
That is when Redflex and competitors like ATS drop in and offer "turnkey" red light camera and speed camera solutions (view a sample presentation). With no effort or cost exposure on the part of the jurisdiction, many officials see nothing to lose by signing up to allow either Redflex or ATS to issue tickets on its behalf. Rhode Island based Nestor, Inc. also offers red light camera programs, but it closed trading yesterday at just 9 cents per share having announced a $2.5 million net loss for the first quarter.