Tyco International Ltd. agreed to sell its fire and security business in South Korea to Carlyle Group LP for about $1.93 billion and boosted its share buyback program to $2 billion.
Tyco, based in Schaffhausen, Switzerland, is selling Tyco Fire & Security Services Korea Co. and subsidiaries that form the ADT Korea security business, the company said today in a statement. The transaction is the biggest private-equity buyout deal in U.S. dollar value in Korea since 2008, according to Carlyle, a Washington-based asset management firm.
Net cash proceeds are expected to be $1.85 billion, Tyco said. The company’s board added $1.75 billion to its stock repurchase authorization, bringing the total to $2 billion.
Tyco provides more than 3 million customers with fire protection and security products and services, according to the company. About 19 percent of its $10.4 billion in revenue in fiscal year 2012 came from the Asia-Pacific region. Tyco considers itself the world’s largest “pure-play fire protection and security company,” while ADT Korea has about 475,000 customers.
“ADT Korea is a highly stable and profitable business with attractive market positioning, strong brand power and excellent cash flow profile,” Sanghyun Lee, managing director on the Carlyle Asia buyout team, said in the firm’s statement. At the same time, the Korean security industry is “under-penetrated,” the executive said.
ADT Korea is expected to have revenue of about $600 million in fiscal 2014, and operating income of $125 million, Tyco said. About 5 cents of earnings per share in the fiscal second quarter will be reflected in discontinued operations as a result of the deal, it said. EPS from continuing operations before special items will probably be 39 cents to 41 cents, down from a forecast of 44 cents to 46 cents, it said.
ADT Korea provides central monitoring services, with video surveillance and response, as well as customized security and guard services. The unit, headquartered in Seoul, has about 7,500 workers.
Selling the Korean unit is “a unique opportunity to realize the value generated in the business over time and redeploy it to further enhance our portfolio and maximize shareholder value,” Tyco Chief Executive Officer George Oliver said in the statement.
Carlyle reported a 79 percent increase in profit last year as its portfolios gained in value and it seized on rising stock markets to sell holdings. The company was founded by William Conway, Daniel D’Aniello and David Rubenstein.
The firm sold shares of railway operator Genesee & Wyoming Inc., French cable operator Numericable Group SA and ratings company Nielsen Holdings NV, in addition to completing sales of aviation-information company Arinc Inc. and German software maker P&I Personal & Informatik AG, both of which returned more than 4.5 times the investment by Carlyle and its limited partners.
The Tyco deal is expected to be completed in the second quarter of this year, Carlyle said.
Tyco shares fell 0.7 percent to $42.18 in New York on Feb. 28, for a 12-month gain of 32 percent.Carlyle has advanced 19 percent in a year.
Equity for the transaction will come from Carlyle Asia Partners IV and Carlyle Partners VI, the asset manager said. Carlyle has invested more than $920 million of equity in 17 transactions in Korea as of December 31, 2013. Carlyle’s current and former investments in Korea include KorAm Bank, Hyundai HCN, EO Technics, Tapex and Yakjin Trading.
Carlyle Group has committed debt financing from Korea Exchange Bank, Kookmin Bank, Industrial Bank of Korea, Korea Investment & Securities and UBS AG. Clifford Chance and Lee & Ko are legal advisers on the transaction for Carlyle, while Morgan Stanley acted as Tyco’s financial adviser.