The transaction
combines two of the premier companies in the North American residential and
commercial security industry. Broadview Security is one of the leading monitored
security companies in North America. ADT is the world’s largest electronic
security provider. Tyco intends to combine the two businesses under the ADT
name.
“This
transaction provides us the opportunity to further strengthen our position in
the residential and commercial security industry, while advancing Tyco’s
overall strategy to increase its presence in its core security, fire and flow
control platforms,” says Tyco Chairman and CEO Ed Breen. “Broadview’s
strong presence in the North American security market, significant recurring
revenue and attractive margins will enhance ADT’s financial performance and
support our long-term growth in this large, fragmented and highly competitive
industry.”
Bob Allen,
president and CEO of Broadview says, “We are proud of all we have achieved
as a company to increase our customer base, and to grow our revenue and income
in a challenging economy. We view this transaction as the culmination of these
efforts, providing our shareholders with an attractive premium for their
shares, including cash consideration and an opportunity to participate in the
future growth of Tyco Int’l.”
“ADT and
Broadview are an excellent strategic fit. We have highly complementary product
and service offerings, strong sales and marketing organizations and a shared
dedication to quality customer service,” says Naren Gursahaney, president
of ADT Worldwide. “We expect this combination to result in an even more
efficient, more successful ADT.”
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.
Sandra Jones,
principal of Chardon, Ohio-based consultants Sandra Jones & Co., says the
deal was not unexpected and speaks to the continuing appeal of recurring
revenue-based businesses.
One of the key
drivers of separating Broadview from Brink’s was so the security monitoring
business would become a pure play and attractive opportunity for acquisitions,”
she tells SSI. “It was not a matter of if it would then be sold, but when,
by whom and how much. Even in a down economy the value of RMR continues to fuel
investment in this industry, and reinforces the need for systems integrators
and security dealers to continually build RMR.”
Reaction from the
industry has begun to roll in. J. Matthew Ladd, president of The Protection
Bureau in Exton, Pa., a leading regional security systems providers, views the
deal as a “wise” move for both players but believes Brink’s workers
may pay the price.
“For the
industry, it does bring the consolidation to an even higher level; they will
have the ability to be a major factor on recurring rates, which they will be
able to increase,” Ladd tells SSI. “It will be toughest on the
Brink’s employees, many of which will lose their jobs or at least see a cut in
wages. When two companies their sizes combine, duplication in personnel is not
good for the company being purchased.”
Excluding
transaction and integration-related expenses, Tyco expects the transaction to
become accretive to earnings before special items by approximately 7 cents in
the first full year after closing, increasing to approximately 14 cents in year
two. The combination is expected to result in operating synergies of
approximately $150 million.
