Apollo acquires ADT for $6.9bn

April 2016 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

In a transaction valued at $6.9bn, the ADT Corporation has entered into a definitive agreement to be acquired by Apollo Global Management LLC in an all cash transaction.

As part of the agreement with Apollo, a leading global alternative investment manager, ADT, a leading provider of monitored security, interactive home and business automation in the US and Canada, will be merged with Prime Security Services Borrower LLC (and its subsidiary Protection 1), a leading full-service business and home security company in the US (also owned by Apollo) for $42.00 per share in cash.

The purchase price represents a premium of approximately 56 percent over ADT’s closing share price and, when combined with Protection 1, represents an aggregate transaction value of approximately $15bn.

“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.”

Following the completion of the acquisition, the combined company will continue to operate from ADT’s current headquarters in Boca Raton, Florida. Furthermore, the newly combined company will conduct its business under the ADT brand.

“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 $318m in recurring monthly revenue and total annual revenue in excess of $4.2bn, placing the businesses in a strong position to drive innovation and to capitalise on growth opportunities in the future.”

The merger agreement includes a ‘go-shop’ period, during which ADT and its board of directors (which unanimously approved the transaction) may actively solicit, receive, evaluate and potentially enter into negotiations with parties that offer alternative proposals during a 40-day period following the execution date of the definitive agreement. There can be no assurance that this process will result in a superior proposal. ADT does not intend to disclose developments about this process unless and until its board has made a decision with respect to any potential superior proposal.

Confirmed as the new CEO of the combined business, following the closing of the transaction, is Timothy J. Whall, currently the president and CEO of Protection 1. Mr Whall said: “The combined company will be a market leader with a powerful brand and scale resulting in an enhanced overall customer experience. 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.”

Serving as the financial advisers to ADT during the transaction are Goldman Sachs and BofA Merrill Lynch. For Protection 1, Barclays, Citigroup Global Markets Inc., Deutsche Bank, and RBC Capital Markets, LLC are serving as financial advisers. Legal advice to ADT is being provided by Simpson Thacher & Bartlett LLP, while Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal adviser to Protection 1 and Apollo.

Subject to the conclusion of the applicable antitrust waiting periods in the US and Canada, ADT stockholder approval and other customary closing conditions, the acquisition of ADT by Apollo is expected to be completed by June 2016.

Fraser Tennant