ADT notes backing buyout and merger to be announced later this week

By Paul A. Harris

Portland, Ore., April 12 – ADT Corp. is expected to kick off a notes offering later this week, according to a market source.

The deal is expected to price during the April 18 week.

Deutsche Bank Securities Inc. is expected to lead the offering, which is backing the buyout by Apollo Funds and merger with Protection 1, the source added.

As reported, the Boca Raton, Fla.-based company stated that it would bring an expected $1.89 billion of notes, which are to come in an offering marketed to qualified institutional investors.

Also, at least $1.25 billion of additional notes are to be sold to an affiliate of the company’s sponsor, Apollo, and certain other investors, in a private placement.

The financing also includes a $1.81 billion senior secured credit facility. Barclays, Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and RBC Capital Markets LLC are the lead banks on the debt. PSP Investments Credit USA LLC is also a committed lender under the debt financing.

Under the agreement, ADT is being acquired for $42.00 per share in cash and merged with Prime Security Services Borrower LLC (Protection 1), a full-service business and home security company also owned by Apollo. When combined with Protection 1, the aggregate transaction value is about $15 billion.

Other funds for the transaction will come from the issuance of $750 million of preferred securities to an affiliate of Koch Equity Development LLC and an equity contribution of about $4.5 billion from funds managed by Apollo and co-investors.

With this transaction, Protection 1 will get a new $255 million revolver, bringing its total combined senior secured revolver to $350 million.

Protection 1 expects that its existing $1,095,000,000 first-lien term loan and $260 million second-lien term loan will remain outstanding.

Concurrently with the closing of the merger, Protection 1 intends to redeem all of ADT’s outstanding 2¼% senior notes due July 2017 and 4 1/8% senior notes due April 2019 and to repay all outstanding borrowings under ADT’s revolver.

ADT’s remaining $3.75 billion of total senior notes are expected to remain outstanding.

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.

Closing is expected by June, subject to the conclusion of the applicable antitrust waiting periods in the United States and Canada, ADT stockholder approval and other customary conditions.

ADT is a Boca Raton, Fla.-based provider of monitored security, interactive home and business automation and related monitoring services.

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