ADT hub to remain in Boca Raton
Company part of $6.9B Apollo acquisition deal
ADT’s stock soaredTuesday after the nation’s largest residential security business announced that it would be acquired by a private equity firm in New York for $6.9 billion.
The stock closed at $39.64, up nearly 48 percent on the New York Stock Exchange.
Apollo Global Management plans to combine ADT, based in Boca Raton, with Protection 1, a Chicagosecurity firm owned by Apollo. When combined, the deal is valued at $15 billion. The $42-per-share purchase price represents a premium of about 56 percent over ADT’s closing share price of $26.87 on Friday.
The combined company would be headquartered in Boca Raton and led by Timothy J. Whall, currently president and CEO of Protection1, ADTsaid in anews release. ADT has 450 employees in Boca Raton and 6.6 million customers nationwide.
Kelly Smallridge, president of the Business Development Board, said shewas “thrilled to receive thenews this morning that ADT will remain in our county.” She said that given the pending acquisitions of Office Depot and Jarden by outside companies, “we clearly under-
“This transaction represents a highly attractive premium for ADT’s shareholders.” Naren Gursahaney, ADT’s CEO
stand how important the retention part is to this county’s economy.”
The transaction represents one of the biggest leveraged buyouts— takeover of a company using debt— in recent years, the Wall Street Journal reported. ADT has more than $5 billion in debt, according to S&P Global Market Intelligence, and a so-called enterprise value of close to $10 billion.
In the 1980s, there were notable failure soft he leveraged-buyout strategy including Federated Department Stores, Northwest Airlines, Grand Union supermarket chain, Regal Cinemas and Revco Drug Center – some leading to bankruptcies, according to a Standard & Poor’s report in Bloomberg Businessweek. Companies that have benefited from leveraged buyouts included Aramark, Duracell, Ethan Allen and Harley-Davidson.
ADT’s CEO Naren Gursahaney said the combination of Protection 1 with ADT will better position the combined company to expand the services it offers in the U.S. and Canada.
“This transaction represents a highly attractive premium for ADT’s shareholders,” said Gursahaney, who has led ADT since it became a public company in 2012, spinning off from Tyco International.
Whall, who began working in high school for his family’s security business and worked his way up to CEO, said Protection 1’s commercial presence will speed ADT’s expansion into the commercial sector.
Protection 1 has 2 million customers and employs more 4,000 people across the country. In South Florida, Protection 1 has sales offices in Boynton Beach and Miami, according to itswebsite.
Marc Becker, senior partner at Apollo, said the combined company will generate a combined $318 million in recurring monthly revenue and total annual revenue in excess of $4.2 billion.
ADT’s board unanimously approved the transaction, and the acquisition of ADT is expected to be completed by June. Closing the deal is subject to ADT stockholder approval and antitrust waiting periods in the United States and Canada.
But the merger agreement also includes a “goshop” period, during which ADT and its board may enter into negotiations with parties that offer alternative proposals during a 40-day period after the execution date of the definitive agreement.
The transaction is being financed through $1.56 billion in new first lien term loans, $3.14 billion in new second lien financing, the issuance of $750 million of preferred securities to an affiliate of Koch Equity Development LLC, the investment and acquisition subsidiary of Koch Industries and an equity contribution of about $4.5 billion from funds managed by Apollo and co-investors.
In fiscal 2015, ADT posted revenue of $3.6 billion, up from $3.4 billion a year ago. The company also plans to market to renters and the do-it-yourself security market, including combining ADT’s
24⁄7 security monitoring service with LG’s Smart Security product.
In a note to investors before Tuesday’s announcement, William Blair analyst Nicholas Heymann valued ADT at $49 to $57 a share, given its debt of $5.33 billion and $269 million in monthly recurring revenue.
“We sense there are growing questions — not about the underlying value of ADT’s business franchise, but whether it can be maximized as a public company,” Heymann said in his Feb. 3 report.