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Oct 10, 2023

ADT completes sale of commercial business for $1.6 billion

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On October 2nd, ADT announced the completion of the divestiture of its commercial security, fire and life safety business unit to GTCR.

GTCR LLC is a leading private equity firm, based in Chicago, with over 40 years of deep sector expertise. They purchase the ADT commercial business for $1.6 billion.

The net proceeds of approximately $1.5 billion significantly reduced the company’s net debt and leverage upon the closing. All net proceeds will be used for debt redemptions and repayments, expected to occur during the current quarter. As previously announced, the commercial business unit will be reported as discontinued operations beginning in the third quarter of 2023 for current and historical periods. ADT will provide further information as part of its upcoming third quarter 2023 earnings conference call.

Strategic Rationale:

  • The transaction supports ADT’s journey to be the premier provider of smart home and residential solar solutions by leveraging our strategic differentiators: innovative offerings, unrivaled safety and premium customer experiences.
  • With a stronger financial profile, ADT will be better positioned to prioritize investments that we believe will drive profitable, capital-efficient revenue growth for the long term.
  • At the close of the transaction, ADT 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 11.2X1 including the estimated allocation of corporate costs.
  • Estimated cash interest savings from debt paydown approximately offsets 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 our 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.

Jim DeVries

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. 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.”

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.”

David Donnini

“ADT Commercial has established itself as an innovative leader 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 & 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.”

ADT provides safe, smart and sustainable solutions for people, homes and small businesses. Through innovative offerings, unrivaled safety and a premium customer experience, all delivered by the largest network of smart home security and rooftop solar professionals in the U.S., we empower people to protect and connect to what matters most. For more information, visit adt.com.