Private equity firm Apollo Global Management LLC (NYSE: APO) announced Tuesday morning that it has reached an agreement to acquire home security company ADT Corp. (NYSE: ADT) in an all-cash transaction valued at approximately $15 billion. Apollo is paying $42 cash per share, a premium of 56% to Friday’s closing price for ADT shares.
Listed as a co-investor in the deal is Apollo-owned Prime Security Services Borrower, known as Protection 1, with which ADT will be merged once the acquisition of ADT is completed. The combined company will operate “primarily” under ADT’s brand.
The merger agreement includes a 30-day “go-shop” period during which ADT may actively seek, evaluate and potentially enter an agreement with other parties.
Apollo said that fully committed funding is in place, including nearly $10 billion from these sources: first-lien term loans of $1.56 billion, second-lien financing of $3.14 billion, $750 in preferred securities to an affiliate of Koch Industries and $4.5 billion in funds managed by Apollo and co-investors.
Protection 1’s contribution is more complicated. In addition to a new $255 million first-lien revolving facility the firm’s contribution includes:
In addition, concurrently with the closing of the merger, Protection 1 intends to redeem all of ADT’s outstanding senior unsecured 2.250% notes due July 2017 and senior unsecured 4.125% notes due April 2019, which will be redeemed in accordance with the applicable indenture, and to repay all outstanding borrowings under ADT’s revolving credit facility. Finally, ADT’s remaining $3.750 billion of total senior unsecured notes will be guaranteed by Protection 1 and all wholly owned domestic subsidiaries of the combined company and will be secured by first priority security interests in substantially all of the assets of the issuer and the guarantors. As a result, Protection 1 expects that these notes will maintain their current ratings and remain outstanding.
Adding in an existing $1.095 billion first-lien term loan and $260 million second-lien term loan brings Protection 1’s contribution to roughly $5 billion.
Last week Apollo Global agreed to acquire Apollo Education Group Inc. (NASDAQ: APOL) for $1.1 billion. Apollo Education operates the University of Phoenix.
ADT stock traded up about 52.6% in Tuesday morning’s premarket session to $41.00, after closing at $26.87 on Friday. The stock’s 52-week range is $24.22 to $42.88.
Apollo stock was inactive. Shares closed at $13.40 on Friday, in a 52-week range of $12.35 to $23.90.