What Is the Rationale behind the Apollo-ADT Merger?



The merger combines two big home security companies

Apollo (APO) owns Protection 1, which is a competing home security company with ADT (ADT). The headquarters of the company will remain in Florida, and the combined company will take the ADT name. The companies did not mention synergy estimates, although there certainly will be some. Synergy estimates are usually for the benefit of the acquiring company’s stockholders, which isn’t really relevant in the case of a private equity deal.

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Comments from management

“We are tremendously excited by this unique opportunity to combine two premier businesses,” said Marc Becker, senior partner at Apollo. “This transaction provides the opportunity to dramatically enhance our position in the large, fragmented and growing residential and business interactive electronic monitoring industry. Pro forma for the transaction, the newly created company will generate a combined $318 million in recurring monthly revenue and total annual revenue in excess of $4.2 billion, placing the businesses in a strong position to drive innovation and to capitalize on growth opportunities in the future.”

“The combined company will be a market leader with a powerful brand and scale resulting in an enhanced overall customer experience,” said Timothy J. Whall, president and CEO of Protection 1, who will be the CEO of the combined business following the closing of the transaction. “In addition, Protection 1’s robust commercial presence will speed ADT’s expansion into the commercial sector supported by increasing commercial sales and technical skills across a well matched national footprint.”

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).


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