- Security giant ADT Security Services recently announced it is buying Defenders for a price of approximately $381 million. These are the details about the deal.
Security giant ADT Security Services recently announced that it is buying Defenders (its largest independent dealer) for a price of approximately $381 million. The purchase price is based on ADT’s closing stock price of $7.45 on January 3.
“We’re excited to officially join forces with the impressive Defenders team after successfully partnering with them for nearly 22 years so that, as one company, we can create a unique and simplified platform,” said ADT chief executive officer Jim DeVries. “This opportunistic acquisition creates numerous strategic, financial and operational advantages for ADT, and is consistent with our stated goal of driving down the capital intensity of the business as we seek to drive long-term, profitable growth.”
As part of the deal, Defenders founder Dave Lindsey and Jessica Lindsey received approximately 16.3 million shares of ADT common stock for 100% of their ownership in Defenders. The remaining $260 million of consideration was paid in cash to retire existing Defenders debt, fund other liabilities, and pay transaction expenses. And the cash consideration was partially funded from existing revolving credit facilities.
“Together, we will have greater marketing efficiency through unified brand messaging, enhanced control of the customer experience, and the ability to provide a full suite of innovative security and home automation products, including consumer financing, to a complementary geographic footprint,” added DeVries. “Over time, we also expect lower subscriber acquisition costs, an improved revenue payback period, and new account gains from the optimization of our combined ecosystem.”
Launched in 1998 and headquartered in Indianapolis, Defenders currently employs approximately 2,900 employees across more than 130 field branch locations. And the company’s direct marketing efforts generate more than six billion ADT advertising impressions annually.
“We have built our business by partnering with ADT to sell and install state-of-the-art security systems, helping to protect more than 2.2 million families through our best-in-class marketing team and expert knowledge of the industry,” explained Dave Lindsey. “Given this longstanding and productive relationship, we are proud that this transaction will integrate us even closer into the ADT team, and I am excited to be a significant shareholder and see the benefits we are able to deliver to customers as a combined company.”
There are several immediate strategic and financial benefits of the deal. This includes an enhanced customer experience as it will provide the ability to drive a unified brand message and premium customer experience to the majority of ADT’s residential customers. Plus it will simplify the operating ecosystem by establishing a single party focused on the customer experience and lifetime value while reducing channel conflict and potential for customer confusion. And it will improve marketing by tapping into Defenders’ strengths in customer acquisition to drive optimized spend across channels and enable more effective marketing messaging and customer segmentation. Plus it will significantly enhance the ability to bring new initiatives to a broader customer base quicker, including consumer financing, DIY, and innovative equipment, and service offerings. Another immediate benefit is capital efficiency through the elimination of dealer “margin” — which is expected to be modestly beneficial to 2020 net cash provided by operating activities and free cash flow before special items.
“This acquisition brings our direct response marketing capabilities, best-in-class sales expertise and national reach to a leading provider of security, automation, and smart home solutions,” stated Jim Boyce President and Chief Executive Officer at Defenders. “Together, we will be better positioned to leverage the trusted ADT brand, improve the combined company’s go-to-market operations and deliver an enhanced customer experience.”
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