Apollo Global to buy home security company ADT Corp for $7 bn

US private equity firm Apollo Global Management yesterday struck a deal to buy home security company ADT Corp for nearly $7 billion in cash, the biggest leveraged buyout (LBO) of the year so far.

Under the terms of the deal, Apollo will pay $42 for every ADT share, a 56-per cent premium to ADT's Friday closing price.

Apollo said that the transaction will be financed primarily through $1.555 billion in new first-lien term loans, $3.140 billion in new second-lien financing, the issuance of $750 million of preferred securities to an affiliate of Koch Equity Development, and an equity contribution of around $4.5 billion from funds managed by Apollo and co-investors.

Financing is being provided by Barclays, Citigroup Global Markets, Deutsche Bank and Royal Bank of Canada.  PSP Investments Credit USA is also a committed lender under this debt financing.

Apollo plans to merge ADT with Protection 1, a smaller US peer it acquired last year for a reported $1.5-billion and later merged it with ASG Security.

The combined company will be valued at $15 billion, including debt, and have annual revenues of $4.2 billion, Apollo said.

The deal, which is expected to close by June, includes a 40-day "go-shop" period, where ADT can solicit and consider alternative proposals.

The ADT deal is one of the biggest LBO in recent years since banks have curtailed loans due to choppy equity, debt and other markets this year.

Tyco International had acquired ADT in the late 1990s for $5.4 billion and spun it off in 2012 as part of the diversified giant's plan to split its business into three independent publicly traded companies (See: Tyco International to split into three public firms).

ADT, based in Florida, is a leading provider of security and fire alarm systems in North America, serving more than 6.5 million residential homes and small businesses.

It designs, sells, installs, monitors and maintains these systems, and provides video, health, and interactive services to the home. The business has annual revenue of around $3.6 billion.

It has more than 200 branch locations and 6 monitoring centres across the US and Canada.

ADT holds about 27 per cent share of the $35 billion North America's home and business security market.

Vivint Inc, owned by private equity firm Blackstone Group, holds about 4 per cent and Protection 1 about 3 per cent.

Protection 1 is a business and home security company in the US that provides installation, maintenance, and monitoring of single-family home security systems, business security systems and multi-family security systems. 

It has over 2 million customers and employs over 4,000 people in more than 90 office locations and five monitoring centers across the US.