Apollo Global Management LLC (NYSE: APO) agreed to acquire home-security monitoring company ADT Corp. (NYSE: ADT) for about $6.9 billion -- less than three weeks after one of the private- equity firm’s co-founders said its list of potential leveraged buyouts had disappeared as debt markets seized up.
Apollo will pay $42 a share in cash for the Boca Raton, Florida-based company, according to a statement Tuesday. That’s 56 percent above ADT’s closing price on Friday.
The deal is at least the second to be announced by Apollo since co-founder Josh Harris said on Jan. 29 that the “financing markets are shutting down,” causing the firm’s acquisition pipeline to dry up.
Riskier corporate loans became so unappealing in the fourth quarter that banks had to boost yields on more than $23 billion to sell them, compared with repricing $11.7 billion in the previous three months, according to data compiled by Bloomberg. In the corporate bond market globally, sales slowed to an 11- year low in January.
ADT surged 53 percent to $41.20 at 8:19 a.m. in New York before U.S. exchanges opened. The advance would put a squeeze on so-called short-sellers, people who agreed to sell ADT with borrowed stock on the assumption it would fall and who account for about 20 percent of the company’s available shares, according to data compiled by Bloomberg.
Apollo plans to combine ADT with Protection 1, a home- security company it also owns. With the combination, the aggregate deal value is about $15 billion, Apollo said.
ADT can actively solicit better offers for 40 days after a definitive agreement is signed, according to the statement. Goldman Sachs Group Inc. is lead adviser to ADT, while BofA Merrill Lynch also is advising the company.
Protection 1’s advisers are Barclays, Citigroup Global Markets Inc., Deutsche Bank, and RBC Capital Markets LLC. Those banks also are providing financing for the deal.
ADT’s board unanimously approved the transaction, which Apollo said it expects to complete by June. The deal, the value of which is based on about 165.3 million shares outstanding, is subject to approval by ADT shareholders.
Apollo also last week announced that it and other investors agreed to buy Apollo Education Group Inc., owner of the University of Phoenix, for $1.1 billion. Tyco International Ltd. acquired ADT in 1997 for $5.6 billion and spun the company off in 2012.