Tyco Buys Brink’s Home Security for $2 Billion

Tyco International Ltd., owner of ADT, has acquired competitor Brink's Home Security for $2 billion in cash and stock.

Tyco intends to combine the two businesses under the ADT name, the company said in a statement.

Brink’s, which now operates as Broadview Security, has more than 1.3 million recurring revenue accounts throughout North America with annualized revenue of approximately $565 million.

ADT has more than 7.4 million recurring revenue accounts globally and generated revenue of $7 billion in fiscal 2009.

ADT's North American residential and small business operation, which is the most comparable to Broadview, has 4.8 million recurring revenue accounts and revenue of $2.2 billion in fiscal 2009.

ADT owns 29.7 percent of the North American security market, according to a 2007 study by Barnes Associates. Brink’s has a 4.9-percent market share. The next biggest players are Monitronics, a security dealer network, at 2.4 percent, and Stanley (formerly Honeywell Monitoring Services) with 1.4 percent.

Combined with Brink's, the new ADT will have a 50-percent 30 percent share [amended data from IMS] of the market for monitored residential alarm systems, according to IMS Research, but that is far from a consolidation of the industry.

The bulk of the security installation market — some 60 percent — is controlled by independent dealers, and that figure has remained fairly stable over the years, sources tell CE Pro.

Lehman Brothers estimates that this group consists of "more than 14,000 small and midsized regional players."

Even though Tyco owns security manufacturer Digital Security Controls (DSC), ADT has not standardized on that product line. In addition to DSC, the security company installs products from GE Security and Honeywell.

Brink's, over the years, has installed products from C&K Systems, which is now part of Honeywell. According to the CE Pro 100 report, Brink's continues to use Honeywell products.

About the Acquisition

Tyco, based in Schaffhausen, Switzerland, said it is paying $42.50 per share for the Irving, Texas-based provider of home security services, representing a premium of more than 35 percent over Brink's stock, which closed Friday at $31.42.

The acquisition price amounts to 42 times the amount of Brink’s monthly recurring revenue, which is on the high-end of the industry norm, but not off the charts, according to security industry experts.

Brink's shareholders will have the option to receive $42.50 per share, a combination of cash and Tyco stock or shares of Tyco alone. Tyco expects the deal to close in the second half of its fiscal year, which began Sept. 26, 2009.