New parental supervision on the board of directors of a traditionally poorly run microcap could get this long-underperforming but cash-rich name back on track.

Mount Laurel, N.J.-based Mace Security International Inc. (Nasdaq:MACE) has bounced from one business to the next in recent years, punishing its shareholders in the process. In 2002, after concluding that operating car and truck washes wasn’t all it was cracked up to be, Mace set its sights on the personal defense and electronic surveillance security industry. A series of acquisitions followed in which the company acquired the rights to the well-known Mace brand pepper spray, its namesake business.

Mace’s attempted roll-up of security products-related businesses also has yet to result in sustainable profits. Generally, we’d avoid a microcap name that has floundered strategically with a poor management track record, and such would also be the case with Mace except for two important factors. First, Mace now trades for significantly below its net tangible book value. Further, Mace’s corporate governance has significantly improved in recent months with the shake-up of its board of directors after its most recent annual meeting, held last December. The new board should lead to greater alignment in the future between shareholders and management.

Five of the company’s six board members are now classified as independent directors. Mace CEO Louis Paolino remains on the board as its sole management representative. Lawndale Capital Management, which holds a nearly 10% stake in Mace and is Mace’s largest outside shareholder, threatened a proxy contest last fall, which resulted in a variety of corporate governance improvements, including the new board alignment. Ancora Capital, Mace’s second-largest shareholder, supported these actions. In January of this year, Ancora urged Mace to promptly sell or shut down all money-losing businesses, agree to a moratorium on making any new acquisitions and promptly buy back its stock (given the depressed share price).

Over the course of 2007, Mace did succeed in selling its car wash operations for cash in Arizona, the Northeast and most of Florida. Mace’s remaining car washes are primarily located in Texas. For the most part, the value in the car wash operations lies in the underlying real estate. Mace has yet to file its earnings report for year-end 2007, but for the quarter ended Sept. 30, Mace reported a tangible . . .

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