ADT’s private-equity owner, Apollo, will continue to own most of the company’s shares after its return to the public market
The Boca Raton, Fla.–based ADT is planning to offer 111.1 million shares priced at $17 to $19, to raise about $2 billion at the midpoint of the estimated range. The company is planning to list on the New York Stock Exchange under the ticker symbol “ADT.”
Morgan Stanley, Goldman Sachs, Barclays, Deutsche Bank, RBC, Citigroup, Bank of America Merrill Lynch and Credit Suisse are joint bookrunning managers on the deal, with eight other firms acting as co-managers. The deal is expected to price next week, according to data firm Ipreo.
Proceeds will be used to redeem debt, as well for the catchall “general corporate purposes,” which includes growth initiatives, according to ADT.
Apollo Global Management APO, +0.14% , which took the company private in February 2016 in a $6.9 billion leveraged buyout, will continue to own the majority of the shares, making ADT a “controlled company” under NYSE rules. That means Apollo continues to call the shots.
It has roots in the 19th century
ADT was created in 1874 as American District Telegraph, harnessing what was the leading communications technology of the time. From there, the company advanced to the call box, a system that allowed signals to be transmitted by a watchman to alert the police, say, or the fire department of the need for assistance. In the 1900s, the company came under the control of AT&T (T), starting its switch to the signal business that was the first iteration of its security service. In 1940, it introduced the ultrasonic burglar alarm along with a fire-detection system. In 1969, the company went public for the first time on the NYSE.
It’s a big player in its market
ADT, which has grown through acquisitions, including most recently of Protection One and ASG, describes itself as the leading provider of security and monitoring services in the U.S. and Canada. The company estimates that it’s about five times bigger than the next largest residential alarm competitor, Vivint Home Security, measured by revenue, with a roughly 30% market share.
The company may have exposure to a surprising liability
One of the risk factors mentioned in the prospectus is the company’s liability for obligations of the Brink’s Co., thanks to its acquisition of a business formerly owned by Brink’s called Broadview Security. That business is subject to the Coal Industry Retiree Health Benefit Act of 1992, meaning it must cover the costs of health-care coverage for retired workers suffering from coal-related ailments.
Brink’s has created a Voluntary Employee’s Beneficiary Association trust to cover those liabilities, and Brink’s has agreed to indemnify the business for any and all liabilities stemming from its former coal operations. However, if Brink’s and the trust “are unable to satisfy all such obligations, we could be held liable, which could have a material adverse effect on our financial condition, results of operations and cash flows,” says the prospectus.
