In its debut control-oriented distressed deal, Quadrangle Group, the New York media and distressed specialists, have purchased a majority stake in loss-making security services company Protection One for $122.2 million (€95 million).
The deal will see an 87 percent equity stake in Protection One transfer to Quadrangle from debt-laden Westar Energy, the largest electric utility in Kansas. Up to $39.2 million in additional cash will be paid to Westar contingent on future tax payments and recoveries on the securities acquired by Quadrangle.
Wichita, Kansas-based Protection One, with more than 2,300 employees, installs customized security and monitoring systems for residential and commercial customers.
This is a first control-oriented deal for Quadrangle’s distressed debt team since Michael Weinstock, Andrew Herenstein and Christopher Santana defected from New York’s Lazard office in March 2002.
The firm's media and distressed teams both will contribute capital to the transaction.
Weinstock and Herenstein had been co-portfolio managers of Lazard’s $280 million Debt Recovery Fund, which was forced to wind down operations following their departure. Lazard later sued Quadrangle, claiming Weinstock and Herenstein had acted in bad faith by building a distressed business at the investment bank and then scheming to transfer its value and investors to Quadrangle.
According to an article in the Financial Times at the time, Weinstock and Herenstein had become frustrated at alleged conflicts of interest between Lazard’s distressed investment fund and its restructuring advisory business.
Quadrangle was formed in 2001 with the closing of a $1.08 billion media- and communications-focused private equity fund. The firm was founded by Peter Ezersky, Steven Rattner, Joshua Steiner and David Tanner, all former Lazard media investment bankers.
Notably, the fund drew roughly $300 million in investments from high-net-worth individuals, chiefly media industry luminaries.
The firm’s most recent media deal was the $525 million purchase of the cable assets of Bresnan Broadband Holdings from Comcast.
Quadrangle’s distressed group, called the Debt Recovery team, currently manages more than $850 million, according to the firm. It invests in distressed debt securities of “good companies.”