ADT Acquired by Apollo Global Management in Deal Worth Nearly $7B

ADT CEO: Transaction is ‘a highly attractive premium for ADT’s shareholders.’

BOCA RATON, Fla. — ADT Corp. has been acquired by private-equity firm Apollo Global Management LLC in a deal worth about $6.93 billion. The acquisition of the home security company is the latest sign market volatility hasn’t brought takeover activity to a halt.

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Apollo said it plans to merge ADT with Protection 1 and ASG Security, both of which the firm acquired in May, although they will all operate under the ADT name.

“Protection 1’s robust commercial presence will speed ADT’s expansion into the commercial sector,” said Timothy Whall, chief executive of Protection 1. Whall will lead the combined business upon the deal’s completion, expected by June.

The Wall Street Journal first reported the deal Monday night.

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The deal signals that volatility in equity, debt and other markets this year hasn’t brought takeover activity to a halt. In fact, activity so far in 2016 has been surprisingly robust in the wake of the record activity notched in 2015. Private-equity buyouts can be even more vulnerable to such volatility given how much debt firms like Apollo typically employ to make acquisitions, according to WSJ.

“This transaction represents a highly attractive premium for ADT’s shareholders,” said Naren Gursahaney, president and CEO of ADT. “We’re proud to have strengthened the quality of our customer base, improved service and retention, and extended our leadership in innovative solutions such as our ADT Pulse platform and our new Security-as-a-Service offering, ADT Canopy. By combining Protection 1 with ADT, we will be better positioned to expand the breadth and depth of the services we offer to our customers throughout the United States and Canada.”

The deal represents one of the biggest leveraged buyouts in recent years. ADT has more than $5 billion in debt, according to S&P Capital IQ, and a so-called enterprise value of close to $10 billion. Apollo, which also acquired Protection 1 and ASG Security last year, is planning to use its P1 portfolio as a vehicle to buy ADT, the report says.

“We are tremendously excited by this unique opportunity to combine two premier businesses,” said Marc Becker, senior partner at Apollo. “This transaction provides the opportunity to dramatically enhance our position in the large, fragmented and growing residential and business interactive electronic monitoring industry. Pro forma for the transaction, the newly created company will generate a combined $318 million in recurring monthly revenue and total annual revenue in excess of $4.2 billion, placing the businesses in a strong position to drive innovation and to capitalize on growth opportunities in the future.”

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ADT, based in Boca Raton, Fla., has more than 17,000 employees, according to its Web site. The company makes security products for residential customers and businesses, ranging from burglary alarm systems to wireless cameras and video surveillance. The company merged with industrial conglomerate Tyco in the late 1990s in a $5.4 billion deal that scuttled a hostile takeover attempt from Western Resources Inc. Tyco famously used ADT’s Bermuda domicile to relocate the combined company abroad and lower its tax rate.

In 2012, Tyco spun off ADT to shareholders in an effort to refocus the sprawling conglomerate’s operations. ADT would be the latest former Tyco business to find a new home. Covidien PLC, a former Tyco health-care business, was acquired by Medtronic PLC last year in a $40 billion-plus deal that allowed Medtronic to move its U.S. headquarters abroad.

Just last month, industrial company Johnson Controls Inc. agreed to buy another remnant, Tyco Int’l PLC, in a roughly $15 billion deal.

ADT stock is down 30% in the last year. Stay tuned to Security Sales & Integration for ongoing reports and analysis of this enormous industry story.

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