UPDATE: On April 22, 2016, the ADT Corporation announced that its stockholders approved the acquisition of ADT by an affiliate of certain funds managed by affiliates of Apollo Global Management LLC at its special meeting of stockholders held today. Subject to the satisfaction of the remaining customary closing conditions, ADT expects the transaction to close on May 2, 2016. Upon the closing of the transaction, ADT stockholders will be entitled to receive $42.00 per share in cash.
UPDATE: On March 28, 2016, ADT announced the expiration of the "go-shop" period included in the previously announced merger agreement under which ADT will be acquired by Apollo Group affiliates and merged with Protection 1. According to an ADT press release, ADT and its representatives actively solicited alternative acquisition proposals during the go-shop period from 24 potential acquirers. During such time, none of these parties executed a confidentiality agreement or otherwise expressed an interest in pursuing a transaction, and no other party proposed an alternative transaction. 
The acquisition is expected to be completed by June 2016, subject to ADT stockholder approval and other customary closing conditions.
The ADT Corporation, No. 1 on the SDM 100, announced it has entered into a definitive agreement to be acquired by an affiliate of certain funds managed by affiliates of Apollo Global Management LLC and co-investors.
After the transaction closes, Apollo plans to merge ADT with its home security company Protection 1 in a deal valued at $15 billion.
The headquarters of the combined company will remain in Boca Raton, Fla., and the combined company will operate primarily under the ADT brand.
Last year ADT, a provider of security and automation solutions for homes and businesses in the U.S. and Canada, reported $262,666,667 in (Dec. 31, 2014) RMR and 6,663,000 subscribers. It reported gross revenue of $3.4 billion and had approximately 16,000 employees. 
“This transaction represents a highly attractive premium for ADT’s shareholders,” said Naren Gursahaney, president and CEO of ADT. “We’re proud to have strengthened the quality of our customer base, improved service and retention, and extended our leadership in innovative solutions such as our ADT Pulse platform and our new security-as-a-service offering, ADT Canopy. By combining Protection 1 with ADT, we will be better positioned to expand the breadth and depth of the services we offer to our customers throughout the United States and Canada.”    
Protection 1, No. 6 on the SDM 100, last year reported (2014 figures of) $468 million in gross revenue, 1.5 million subscribers and 2,755 employees. “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, who is president and CEO of Protection 1 and 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.”
Protection 1 reported to SDM in early 2015 that it generated $105 million in North American systems integration revenue in 2014, and that among its 1.5 million subscriber accounts, 1.1 million were non-residential. The company reported with this announcement that it now serves more than 2 million customers.
Marc Becker, senior partner at Apollo, said, “We are tremendously excited by this unique opportunity to combine two premier businesses. 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.” 
At the Barnes Buchanan Conference, held February 4 through 5, 2016, Tim Whall was part of a panel titled “Recent Entrants,” which focused on the entrance of private equity and search funds into the security space. 
“There’s a lot of different ways to make money in this business, I think that’s what attracts private equity guys — it’s not one model,” Whall said.
When asked what private equity investors add to the security alarm industry, Whall said, “The financial part is what they’re bringing to the party. They let you look at things in a bigger light in terms of what you can do and how you can bring a return back… They bring banking relationships in spades… Apollo, they’re a behemoth in the space.
“If you can find the right partnership — again, this is our fourth one — it should be a melding of ideas … At the end of the day the core is the management and the equity are trying to make money on the investment…you feel like you have a tight plan, a good plan, a reasonable plan and hopefully with some upside.
“In our space, everybody loves that we don’t really shrink when the market goes down — we’re kind of built-in against big drops — but there is still plenty of room for people to dream about the huge growth, even though…year after year after year you don’t see the huge growth in our space. It’s a fairly safe bet with a nice upside, and then maybe a really nice upside. I think that’s what gets the equity guys excited,” Whall said in this general discussion.
The board of directors of ADT unanimously approved the transaction. The acquisition of ADT is expected to be completed by June 2016. The transaction is subject to the conclusion of the applicable antitrust waiting periods in the U.S. and Canada, ADT stockholder approval and other customary closing conditions.
The merger agreement includes a “go-shop” period, during which ADT and its board of directors may actively solicit, receive, evaluate and potentially enter into negotiations with parties that offer alternative proposals during a 40-day period following the execution date of the definitive agreement. 
Concurrently with the closing of the merger, Protection 1 intends to redeem all of ADT’s outstanding senior unsecured 2.250 percent notes due July 2017 and senior unsecured 4.125 percent 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.
“I think the combination of ADT and Protection 1 is great, for both companies,” said Michael Barnes, founding partner, Barnes Associates Inc. “Since its separation from Tyco in 2012, ADT has been preparing for a reentry into the commercial market segment, and Protection 1 effectively gets them there quickly and efficiently. Also, Protection 1's commercial capability is more focused on RMR oriented segments and arguably dovetails better with ADT.
“While the combination results in a very large company, the combined RMR is roughly the same as the previous combination of ADT and Tyco Integrated Security in North America. However, since the industry has grown, the resulting market share is slightly lower. So from an industry perspective this is not much different than before the ADT/Tyco split. Having said this, I think the combined capability of Protection 1 and ADT is arguably more rational.”
Overall, Barnes said, “Apollo has done well with respect to the value to be paid to ADT. We peg the $42 per share offer at 46 times RMR. Not bad for the industry’s largest player, particularly given ADT’s strong signs of improvement in most of their key performance indicators.”
Jeff Kessler, managing director, equity and industry research, Imperial Capital, said the 56 percent over closing share price is a little deceptive because shares had dropped so low. “The price is OK,” he said, “but it leaves a little wiggle room for another bidder.” Kessler said it all indicates it is hard to raise capital for something of this size at this time. “While it’s unlikely someone else will make a bid, there is a maybe 30 percent chance a bid will come from a telecommunication business,” Kessler said. He explained that a company such as Verizon might see this as an opportunity to get back into the security industry. AT&T recently purchased several central stations, he said, and this might be a good fit for them. If one of these types of companies bought ADT, Kessler said, there would be cultural and branding issues. “They would give all customer care to ADT,” said Kessler.
As far as Protection 1 and ADT go, Kessler said with Tim Whall and the highly respected management team at Protection 1 that will be replacing ADT’s, this is a good fit.
Financing is being provided by Barclays, Citigroup Global Markets Inc., Deutsche Bank and Royal Bank of Canada. PSP Investments Credit USA LLC is also a committed lender under this debt financing. Goldman, Sachs is serving as lead financial advisor to ADT and BofA Merrill Lynch is also serving as financial advisor to ADT. Barclays, Citigroup Global Markets Inc., Deutsche Bank and RBC Capital Markets LLC are serving as financial advisors to Protection 1. Simpson Thacher & Bartlett LLP is acting as legal advisor to ADT. Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal advisor to Protection 1 and Apollo.