Protection One Sold to Investment Firm

TOPEKA, Kan.

The New-York-based investment firm Quadrangle Group LLC has
purchased the majority stake in Protection One Inc. from
Westar Energy Corp. for $120 million.

As part of the deal, Quadrangle agreed to
take up $525 million in debt that Westar had tied up in Pro
One as well as purchase a $228 million credit line Westar
had extended to the security company.

Pro One’s sale, announced Dec. 23, has been on the horizon
for more than a year after Westar was ordered by the Kansas
Corporation Commission (KCC) in December 2002 to reduce its
$3.6 billion corporate debt and divest its nonutility
businesses. An aggressive acquisition program initiated by
former Westar CEO David Wittig caused both Protection One
and Westar to take on large amounts of debt. In early
December, Wittig was indicted on 40 counts of conspiracy,
fraud and money-laundering.

Quadrangle will have an 88-percent stake in Pro One, as the
remaining shares will continue to be held by minority
shareholders. It is unclear what the purchase means for the
Topeka, Kan.-based electronic security company. Pro One
President and CEO Richard Ginsburg was unavailable for
comment.

John Mack III, who with Thomas K. Rankin founded Pro One in
1991 and resigned as CEO in 2000, says that while he has
been sad to see the company lose value, he sees Pro One’s
new ownership as a “big time” positive.

“I’m happy the company is finally free and will be able to
regain its place in the marketplace,” says Mack, who after
leaving Protection One co-founded USBX Advisory Services
and serves as its CEO. “There are still long-term
opportunities in the electronic security business and
Protection One can take advantage of that.”

Pro One’s buyer has no past experience in the electronic
security industry but has specialized on investments in
financially-troubled companies. Business newspaper The
Daily Deal
reports Quadrangle sees Protection One as “a
kind of cable investment because of the wiring access that
the security systems require.” Mack says he expect
Quadrangle to put their full backing behind the growth of
Pro One. “I’m sure they bought it with a view of
revitalizing it,” Mack says. “Equity investors buy
businesses like this to make it grow. My guess is it will
be good for employees. This clears a lot of uncertainty.”

Quadrangle says it plans to deconsolidate $305 million of
the debt, moving it off Westar’s books and on to Pro One’s.
The Daily Deal reports Quadrangle will have meetings
between Pro One’s board, management, regulators and
subordinated and senior debt holders aimed at restructuring
the debt. The restructuring may take place within the
context of a bankruptcy filing, but several sources told
The Daily Deal that is not a first option and no
bankruptcy documents have been prepared.

The Deal also reports that five buyers had indicated
an interest in Pro One over the past few months, with Los
Angeles-based Gores Technology Group signing an exclusivity
agreement at one point. However, Gores let the agreement
lapse, creating an opening for Quadrangle.

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