Apollo Global Management and co-investors are acquiring monitored security company ADT for about $6.94 billion.
The investors will pay $42 per share, the company said. As of 26 January, ADT had 165.31 million shares outstanding.
The company said this deal will be mainly financed through $1.56 billion of new first lien term loans, $3.14 billion in new second lien financing, $750 million of preferred securities issued to Koch Equity Development, and $4.5 billion in equity from Apollo’s and co-investors’ funds.
The purchase price is equivalent to about a 56 percent premium on ADT’s 12 February closing share price.
The transaction will involve a merger between ADT and security company Prime Security Services Borrower’s subsidiary, Protection 1, which will contribute $255 million to a new first lien revolving facility and guarantee ADT’s $3.75 billion of total senior unsecured notes that will remain after the merger.
Once merged, Protection 1 president and chief executive officer Timothy Whall will become CEO of the company. The transaction is expected to close by June.
The combination of ADT and Protection 1 amounts to a transaction value of about $15 billion, the company said. The two companies will run mainly under the ADT brand and keep the headquarters in Boca Raton, Florida.
Following this agreement to merge, ADT enters a “go-shop” period of 40 days, during which it could consider and enter into negotiations with other buyers offering alternate proposals.
Apollo senior partner Marc Becker said in a statement that the newly created company will generate $318 million in monthly revenue, pro forma.
Barclays, Citigroup, Deutsche Bank and Royal Bank of Canada are providing financing to this transaction. PSP Investments Credit is a committed lender. ADT is receiving financial advising from Goldman Sachs and Bank of America Merrill Lynch, and legal advising from Simpson Thacher & Bartlett. Apollo and Protection 1 are receiving legal advice from Paul, Weiss, Rifkind, Warton & Garrisson.
Apollo spokesman Gary Stein was not available to comment.
Apollo manages about $170 billion in assets as of 31 December.
Shares of ADT listed on the New York Stock Exchange were at $40.19 at press time, up almost 50 percent, or $13, from the previous closing of $26.87, giving ADT a market capitalisation of $6.64 billion.