Home Security Company ADT Sold to Apollo Global Management for $6.9 Billion
By Burt Carey
Following three years of falling customer retention and stock prices, home security and alarm manufacturer ADT announced plans for to be purchased in a $6.9 billion buyout by the private equity firm Apollo Global Management.
Apollo agreed to pay $42 per share for ADT, a 56 percent increase from the company’s Friday closing price of $26.87. ADT’s stock shot up 48 percent to $38.64 by Tuesday’s stock market closing, the day the announcement was made. The company has a 40-day window to entertainment other business offers before the deal becomes final.
Apollo plans to merge ADT with its in-house security company, Prime Security Services Borrower LLC, which operates Protection 1. It will operate the merged companies using the ADT brand under Timothy Whall, the current president and CEO of Protection 1. Its headquarters will be located in Boca Raton, Florida. The company expects annual revenues to be about $4.2 billion.
ADT’s stock had sunk 30 percent over the past year, and its latest quarterly sales announcement missed forecasts amid increasing competition from such companies as Vivint, Honeywell, ASG Security, Slomin’s and Monitronics. Time Warner, Comcast, AT&T and Alphabet (Google’s parent corporation) have also entered the home security market.
Industrial giant Tyco spun ADT off in 2012 as an independent publicly traded company, but its market leader position has continued to slip ever since. Tyco, which was recently bought by Johnson Controls, paid $5.6 billion for ADT in 1997.
ADT’s board approved the transaction, which Apollo expects to close by June. The deal is based on about 165.3 million shares outstanding, and must be approved by ADT shareholders.
Apollo believes removing ADT from the pressures of quarterly earnings will help the business focus on attracting new customers and retaining current customers.
Industry analysts say cable and phone carriers such as AT&T and Comcast, which have been adding about 1 million security customers per year, could step up to bid for ADT to take advantage of its customer base and product lines.
“The combined company will be a market leader with a powerful brand and scale resulting in an enhanced overall customer experience,” Whall said.
Just last week Apollo announced that it and other investors had acquired the Apollo Education Group, parent corporation of the University of Phoenix, for $1.1 billion, and that it plans to privatize the company.