Security and protection services
provider
The ADT Corporation
ADTrecently announced the expiry of a 40-day
“go-shop” period during which it solicited superior buyout offers
than the one already signed with a premier full-service business
and home security company owned by Apollo. The company revealed
that it did not receive any suitable acquisition offer from
prospective suitors during this period. Consequently, the original
merger agreement is deemed to hold good and is likely to be
completed by Jun 2016, subject to the fulfilment of mandatory
closing conditions and regulatory approvals.
Last month, ADT inked a definitive agreement to be acquired
by one of the affiliates of the investment management firm Apollo
Global Management, LLC
APO. Post acquisition, ADT is slated to be
merged with Protection 1, a subsidiary of Prime Security Services
Borrower, LLC.
The purchase price of $42 per share equated to a premium of
approximately 56% over ADT’s closing share price on Feb 12, 2016
and represented solid upside potential from the buyout. With the
deal, ADT aims to augment its customer base and foray into the
commercial sector by leveraging Protection 1’s commercial presence
in the U.S. The company also intends to improve customer services
through innovative solutions such as the ADT Pulse platform and its
Security-as-a-Service offering, ADT Canopy. The combined company is
expected to leverage economies of scale and expand its services to
cater to a broad array of customers in the U.S. and Canada.
Over the years, ADT has faced significant pricing pressure
and competition as the security alarm industry is highly fragmented
due to low barriers to entry. The company also faced stiff
competitive pressure on installation, monitoring and service fees.
In addition, cable and telecommunications companies were eroding
its market share by expanding into the monitored security alarm
industry and bundling their existing offerings with monitored
security services. Consequently, by merging with an established
firm like Protection 1, ADT has the opportunity to remarkably
enhance its position in the large, fragmented and growing
residential and business interactive electronic monitoring
industry.
The combined company is expected to operate primarily under
the ADT brand, generating $318 million in recurring monthly revenue
for annualized revenue in excess of $4.2 billion.
ADT currently has a Zacks Rank #3 (Hold). A couple of stocks
in the industry that look promising include FactSet Research
Systems Inc.
FDSand IHS Inc.
IHS, both carrying a Zacks Rank #2 (Buy).