ADT Inc., the most trusted brand in smart home and small business security, announced that it has entered into a definitive agreement to sell its commercial security, fire, and life safety business unit to GTCR, a pioneering private equity firm, for a purchase price of $1.6 billion, subject to customary purchase price adjustments.
Proceeds from the sale, which is expected to close in the fourth quarter of 2023, will be used to reduce debt by $1.5 billion, with cash interest savings expected to offset the impact of divesting the commercial business.
Strategic rationale
- The transaction supports ADT’s journey to be the premier provider of smart home and residential solar solutions by leveraging strategic differentiators: innovative offerings, unrivaled safety, and premium customer experiences.
- With a stronger financial profile, ADT will be better positioned to prioritize investments that believes will drive profitable, capital-efficient revenue growth for the long term.
- At the close of the transaction, the company plans to use the net proceeds from the transaction for debt reduction, resulting in a meaningfully lower leverage profile, improved margins, and strong free cash flow generation.
Financial impacts
- Represents an attractive EV/Commercial Adjusted EBITDA multiple of approximately 11.2× including the estimated allocation of corporate costs.
- Estimated cash interest savings from debt paydown approximately offset the impact of divesting the commercial business.
- Upon completion of the sale, ADT plans to use the net after-tax cash proceeds of approximately $1.5 billion for significant debt reduction, accelerating long-term leverage goals and improving the leverage ratio from the current level of 3.7 down to 3.3.
- ADT’s capital allocation priorities remain unchanged; the company does not plan to change its quarterly dividend.
Author's quote
The decision to divest ADT’s commercial business is a value-enhancing transaction"
Jim DeVries, ADT President and CEO, said, “The decision to divest ADT’s commercial business is a value-enhancing transaction that focuses our portfolio on growth opportunities in our consumer markets. The sale enables ADT to monetize the commercial business at an attractive valuation and accelerate our debt reduction goals."
He adds, "With greater financial flexibility, we will be better positioned to grow through our strategic differentiators and innovative offerings, including our partnerships with Google and State Farm. We will continue our journey to be the premier provider of safe, smart, and sustainable solutions that meet the evolved definition of what safety means to consumers today.”
Partnership with ADT team
DeVries continued, “This transaction is mutually beneficial for ADT and ADT Commercial, which will benefit from GTCR’s support and expertise, positioning the business to continue providing best-in-class solutions and services to its customers. We thank the entire ADT Commercial team for their hard work and look forward to seeing them grow.”
We thank the entire ADT Commercial team for their hard work and look forward to seeing them grow"
“ADT Commercial has established itself as an innovative provider in providing the critical safety services that businesses need to protect their day-to-day functionality,” said David Donnini, Managing Director and Head of Business and Consumer Services at GTCR. “We are very proud to once again partner with the leadership team of ADT Commercial to continue to invest in the platform and deliver the solutions its customers have come to expect. ADT has done a tremendous job in further developing this segment in recent years and we are excited to help drive the business forward in its next chapter of growth.”
Transaction details
Upon closing of the transaction, ADT expects to receive approximately $1.5 billion in net proceeds, subject to final tax calculations and purchase price adjustments. ADT plans to use the net after-tax cash proceeds of the transaction to reduce debt. As adjusted for the transaction, ADT expects its net leverage ratio to be 3.3, down from 3.7, currently.
The transaction has been approved by the Company’s Board of Directors and is expected to close in the fourth quarter of 2023, subject to customary closing conditions, including regulatory approvals.
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