What Are the Conditions of the Apollo-ADT Transaction?



Basics of the transaction

As we saw in the first part of this series, Apollo (APO) is buying ADT (ADT) in a cash deal worth $42 a share. The equity value is $6.9 billion, or $11.3 billion if you include debt.

The stocks of both companies rallied on the merger announcement. The companies are aiming for a close at the end of June 2016, but the deal could close sooner if it gets antitrust approval quickly.

Article continues below advertisement

Conditions precedent

The following conditions need to be satisfied for the merger to close:

  • ADT vote
  • The SEC’s (Securities and Exchange Commission) approval of the proxy statement
  • Global Payment’s filing of a PNR (premerger notification report) to comply with the Hart-Scott-Rodino Antitrust Improvements Act
  • Canadian antitrust approval
  • any other regulatory approvals

Go-shop provision and breakup fees

ADT has a go-shop provision that lasts until March 26. During this period, ADT will be allowed to solicit other bids. Once the go-shop period ends, the company will no longer be allowed to solicit bids. However, the company will be permitted to talk to a potential buyer if it puts forth a bona fide offer that the board of directors considers could lead to a better offer for shareholders. Given the go-shop period, this outcome would be highly unlikely. If ADT accepts a superior bid, it will owe APO a termination fee of $421 million.

Merger arbitrage resources

Other important merger spreads include the deal between Baker Hughes (BHI) and Halliburton (HAL) and KLA-Tencor (KLAC) and Lam Research (LRCX). For a primer on risk arbitrage investing, read Merger Arbitrage Must-Knows: A Key Guide for Investors.

Investors who are interested in trading in the tech sector can look at the iShares Global Technology ETF (IXN).


More From Market Realist