ADT Expected to Be Acquired by Apollo Global Management

Investment group that bought Protection 1 and ASG Security last year is expected to close a multibillion-dollar deal for industry leader ADT.

Scott Goldfine

The Wall Street Journal reports private-equity firm Apollo Global Management LLC is nearing a deal to buy home-security company ADT Corp., according to people familiar with the matter, in the latest sign market volatility hasn’t derailed the red-hot merger market.

According to WSJ, exact terms of the expected takeover couldn’t be learned, but with a $4.4 billion market value as of Friday a deal could value ADT at more than $5 billion given other considerations including the fact that the company’s shares have fallen sharply.

The deal, which the paper says could be announced as soon as Tuesday, would signal that volatility in equity, debt and other markets this year hasn’t brought takeover activity to a halt. In fact, activity so far in 2016 has been surprisingly robust in the wake of the record activity notched in 2015. Private-equity buyouts can be even more vulnerable to such volatility given how much debt firms like Apollo typically employ to make acquisitions, according to WSJ.

The deal would represent one of the biggest leveraged buyouts in recent years. ADT has more than $5 billion in debt, according to S&P Capital IQ, and a so-called enterprise value of close to $10 billion. Apollo, which also acquired Protection 1 and ASG Security last year, is planning to use its P1 portfolio as a vehicle to buy ADT, the report says.

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ADT, based in Boca Raton, Fla., has more than 17,000 employees, according to its website. The company makes security products for residential customers and businesses, ranging from burglary alarm systems to wireless cameras and video surveillance. The company merged with industrial conglomerate Tyco in the late 1990s in a $5.4 billion deal that scuttled a hostile takeover attempt from Western Resources Inc. Tyco famously used ADT’s Bermuda domicile to relocate the combined company abroad and lower its tax rate.

In 2012, Tyco spun off ADT to shareholders in an effort to refocus the sprawling conglomerate’s operations. ADT would be the latest former Tyco business to find a new home. Covidien PLC, a former Tyco health-care business, was acquired by Medtronic PLC last year in a $40 billion-plus deal that allowed Medtronic to move its U.S. headquarters abroad.

Just last month, industrial company Johnson Controls Inc. agreed to buy Tyco in a roughly $15 billion deal. ADT stock is down 30 percent in the last year.