ADT, the nation’s largest residential security firm, has agreed to be acquired by investment firm Apollo Global Management for $7 billion.
Apollo plans to combine ADT, based in Boca Raton, with Protection 1, a Chicago-area security firm owned by Apollo. When combined, the deal is valued at $15 billion. The $42-a-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 Protection 1, ADT said in a news release. ADT has 450 employees in Boca Raton and 6.6 million customers nationwide.
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.
ADT 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 said Protection 1’s commercial presence will speed ADT’s expansion into the commercial sector.
Marc Becker, senior partner at Apollo, said the new 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 “go-shop” 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 Inc. 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.