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.
Tyco also has SimplexGrinnell, American Dynamics, Software House, DSC and Sensormatic, among other security and fire companies.
Excluding transaction and integration-related expenses, Tyco expects the transaction to become accretive to earnings before special items by approximately $0.07 in the first full year after closing, increasing to approximately $0.14 in year two. The combination is expected to result in operating synergies of approximately $150 million.
"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," said Tyco Chairman and Chief Executive Officer 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 Chief Executive Officer of Broadview said, "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 International."
"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," said 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 $7.0 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.
Under the terms of the agreement, for each Brink's Home Security Holdings share, Brink's Home Security Holdings shareholders may elect to receive: (1) $42.50 in cash, subject to proration if the elections would result in total cash consideration exceeding approximately 30% of the total merger consideration as described in further detail below; (2) a combination of $12.75 in cash and a fraction of a Tyco share equal to $29.75 divided by the volume-weighted average price of Tyco's stock on the New York Stock Exchange during the 10-trading day period ending on the fourth full trading day prior to the closing date of the merger, subject to a collar between $32.97 and $40.29; or (3) Tyco shares equal to $42.50 divided by the volume-weighted average price described in (2) above, subject to the same collar. The stock component of the consideration is expected to be tax-free to Brink's Home Security shareholders. As noted above, in the event the cash consideration to be paid to Brink's Home Security shareholders in the transaction exceeds approximately 30% of the total merger consideration, which is equal to approximately $584.5 million, plus an amount determined by multiplying $12.75 by the number of Brink's Home Security options that are exercised prior to closing (the "Available Cash Amount"), shareholders making a cash election will receive a mix of cash and Tyco shares for their shares of Brink's Home Security common stock in amounts that allow the overall cash consideration to be paid by Tyco to be capped at the Available Cash Amount.
The transaction is expected to close in the second half of Tyco's fiscal year, which began on September 26, 2009. The transaction is subject to customary closing conditions, including clearance under the Hart-Scott-Rodino Act and the approval of Brink's Home Security Holdings shareholders.
According to the most recent SDM 100 listing of dealers that monitor, ADT Security Services is number one and Broadview is number 2.
More on the SDM 100, http://www.sdmmag.com/CDA/Articles/sdm100