What ADT's New Partnership With Google Is All About

ADT Inc. (NYSE: ADT) saw a massive gain on Monday after the firm announced a partnership with Google to create the next generation of smart home security. Ultimately, this partnership is looking to combine Google Nest’s hardware and services with ADT’s installation, service and monitoring network.

The partnership will integrate Google’s hardware and services and ADT’s DIY and professionally installed smart home security solutions to innovate the residential and small business security industry. ADT expects to offer certain Google devices to its customers beginning this year and to expand the integration in 2021.

Along with this partnership, Google will be making a $450 million investment in ADT, in return Google will receive a newly created Class B common stock having all of the rights and preferences of ADT’s common stock minus the right to vote.

After the closing of this deal, Google will own 6.6% of ADT’s outstanding common stock. ADT expects to use the proceeds from this investment to fuel growth and reduce leverage over time.

Looking forward, each company will commit an additional $150 million, based on the achievement of certain milestones, to be used for co-marketing, product development, technology and employee training to advance the partnership.

These investments are expected to accelerate ADT’s capital-efficient growth and drive broader consumer awareness and deeper product innovation for both companies in the fragmented yet rapidly expanding smart home market.

Note that the company’s market cap was below $7 billion prior to the stock moving on Monday. Now the market cap is nearly $11 billion.

ADT stock was last seen up about 58% at $13.58, with a 52-week range of $3.40 to $17.21. The consensus analyst price target is $8.28.

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