Iron Mountain May Sell Italy Unit Amid Focus on Emerging Markets
Iron Mountain Inc. (IRM) is considering pulling out of Italy amid the European debt crisis as the world’s largest document-storage company prefers to boost earnings and sales with acquisitions in emerging markets.
“The big question for us in Europe is growth. Growth is a difficult one. We are growing, but slowly,” Iron Mountain International President Marc Duale said in an interview in Madrid yesterday. The company, which in October 2011 sold its operations in New Zealand, is now also looking at “strategic alternatives” for its business in Italy, he said, adding that no decision has been made yet.
Iron Mountain, based in Boston, last year was pressured by shareholder Elliott Management Corp. to bolster profitability and increase the return on invested capital. Some of Iron Mountain’s European corporate customers, ranging from big financial firms to telecommunications companies, are cutting orders amid the region’s debt crisis, making it difficult for the company to keep its local growth rates, Duale said.
At the same time, the company is making “good progress” at improving its worldwide profitability, the executive said.
“We are definitely looking at a combination of acquisitions particularly in young, emerging markets and organic growth,” he said, adding that record management and data protection companies in Brazil, Russia, India, China and the Middle East could be targets. “Most of those businesses we are looking at don’t tend to be big businesses but there are a few still around.”
Iron Mountain dropped 1.7 percent to $28.65 in New York, valuing the company at $4.9 billion. The stock has declined 2.9 percent in the last 12 months.
Founded in an underground facility in Livingston, New York in 1951, Iron Mountain provides business storage and maintains documents including records, electronic files, medical data and e-mail. It works with more than 140,000 organizations in 39 countries in five continents, according to its website.
The company’s international operations account for about a quarter of sales, with Europe representing “a big part” of that, a company spokeswoman said, adding that Italy is among Iron Mountain’s smallest markets in the region. The company also has units in Germany, Austria, Spain, Greece and the U.K.
New Zealand and Italy are the two markets where the company needed to act, Duale said.
“Frankly, outside these two we are very optimistic that in every other market, either we are already meeting the required return or we’ll be in a position to achieve it by the 2013 deadline.”
The company last year unveiled a three-year strategic plan with the aim to sustain cash flows from the North American division while improving its international business.
Shareholder Elliott, a New York-based hedge fund which owns less than 5 percent of Iron Mountain, last year called for a review of the storage company’s strategy, operations and capital, saying the company’s stock could more than double to $77 a share if it converted to a real estate investment trust and implemented other proposals.
Shareholders said that Iron Mountain’s return on invested capital wasn’t enough and asked the company to earn at least its cost of capital, which stands at about 8 percent, across the company’s international division and also in each market, Duale said.
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