Private equity firm Apollo Global Management (NYSE: APO) agreed to acquire home security services company ADT Corp. (NYSE:ADT), for $6.94 billion in the biggest leveraged buyout so far this year.
After the closing ADT will be merged with Protection 1, a subsidiary of Apollo’s Prime Security Services, in a deal valued at $15 billion. The combined company headquarters will remain in Boca Raton, Florida, and it will operate primarily under the ADT brand.
ADT shareholders will receive $42 per share, representing a 56% premium over ADT’s closing share price on February 12, 2016. Shares of ADT jumped over 50% after the announcement, trading close to the $42 bid price.
“This transaction represents a highly attractive premium for ADT’s shareholders,” said Naren Gursahaney, president and CEO of ADT. “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 combined company will be a market leader with a powerful brand and scale resulting in an enhanced overall customer experience,” said Timothy J. Whall, president and CEO of Protection 1, who will be the CEO of the combined business following the closing. “In addition, Protection 1’s robust commercial presence will speed ADT’s expansion into the commercial sector supported by increasing commercial sales and technical skills across a well matched national footprint.”
“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.”
ADT has a 40-day period to actively seek alternative proposals. ADT’s board unanimously approved the deal, which is expected to be completed by June 2016. The transaction is subject to antitrust waiting periods, ADT stockholder approval and other customary closing conditions.
The transaction, which has fully committed financing in place. Financing is being provided by Barclays, Citigroup Global Markets Inc., Deutsche Bank and Royal Bank of Canada. PSP Investments Credit USA LLC is also a committed lender under this debt financing. Goldman, Sachs is serving as lead financial advisor to ADT and BofA Merrill Lynch is also serving as financial advisor to ADT. Barclays, Citigroup Global Markets Inc., Deutsche Bank, and RBC Capital Markets, LLC are serving as financial advisors to Protection 1. Simpson Thacher & Bartlett LLP is acting as legal advisor to ADT. Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal advisor to Protection 1 and Apollo.
ADT is a leading provider of security and automation solutions for homes and businesses in the United States and Canada. ADT’s broad and pioneering set of products and services, including ADT Pulse® interactive home and business solutions, and health services, meet a range of customer needs for today’s active and increasingly mobile lifestyles. Headquartered in Boca Raton, Florida, ADT helps provide peace of mind to over 6.5 million customers and employs approximately 17,000 people at 200 locations. The company was founded in 1874.
Apollo Global Management LLC is a leading global alternative investment manager with offices in New York, Los Angeles, Houston, Chicago, Bethesda, Toronto, London, Frankfurt, Madrid, Luxembourg, Mumbai, Delhi, Singapore, Hong Kong and Shanghai. Apollo had assets under management of approximately $170 billion as of December 31, 2015 in private equity, credit and real estate funds invested across a core group of nine industries where Apollo has considerable knowledge and resources.
Apollo was founded in 1990 by Leon Black, chairman and CEO. From 1977 to 1990, he worked at Drexel Burnham Lambert Inc., where he served as managing director, head of the Mergers & Acquisitions Group and co-head of the Corporate Finance Department. He serves on the boards of directors of The New York City Partnership and as general partner of AP Alternative Assets. He is co-chairman of The Museum of Modern Art, and a trustee of Mt. Sinai Hospital and The Asia Society. He is also a member of The Council on Foreign Relations. Black is also a member of the board of FasterCures and the Port Authority Task Force. He graduated summa cum laude from Dartmouth College with a major in Philosophy and History and received an MBA from Harvard Business School.
Protection 1 was acquired by Prime Security Services Borrower, LLC in mid-2015 as the flagship for Apollo’s entrance into the alarm monitoring services industry, with a simultaneous acquisition of ASG Security, which has been effectively integrated into Protection 1. Protection 1 is a premier full-service business and home security company in the U.S. that provides installation, maintenance, and monitoring of single-family home security systems, business security systems and multi-family security systems. Protection 1 serves over 2 million customers and employs over 4,000 people in more than 90 office locations and five UL Certified monitoring centers across the country.