ADT Announces Sale of Commercial Business to GTCR for $1.6bn

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 $1.6bn, 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.

The transaction supports ADT’s journey to be the premier provider of smart home and residential solar solutions by leveraging strategic differentiators: innovative offerings, unrivalled safety and premium customer experiences.

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With a stronger financial profile, ADT will be better positioned to prioritise investments that believe 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.

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.

Source: Source Security 

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