International. ADT entered into a definitive agreement to sell its commercial safety, fire and life security business unit to GTCR, a private equity firm, for a purchase price of US$1.6 billion, subject to customary purchase price adjustments.
ADT says proceeds from the sale, which are 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 the sale of the trading business.
ADT shared its strategic justifications for this development:
The transaction supports ADT's journey to become the premier provider of residential solar and smart home solutions by leveraging its strategic differentiators: innovative offerings, unmatched security and premium customer experiences.
With a stronger financial profile, ADT will be better positioned to prioritize investments that we believe will drive profitable and capital-efficient revenue growth over the long term.
Upon closing of the transaction, ADT plans to use the net proceeds from the transaction to reduce debt, which will result in a significantly lower leverage profile, improved margins and solid free cash flow generation.
Financial impacts
* Represents an attractive adjusted commercial EV/EBITDA multiple of approximately 11.2X1, including estimated corporate cost allocation.
* The estimated cash interest savings from debt repayment roughly offset the impact of the divestment of the commercial business.
Upon completion of the sale, ADT plans to use net after-tax cash proceeds of approximately $1.5 billion for significant debt reduction, accelerating long-term leverage targets and improving our leverage ratio from the current level of 3.7 to 3.3.
* ADT's capital allocation priorities remain unchanged; The company does not plan to change its quarterly dividend.
Jim DeVries, President and Chief Executive Officer of ADT, said, "The decision to sell ADT's commercial business is a value enhancement transaction that focuses our portfolio on growth opportunities in our consumer markets. The sale enables ADT to monetize the trading business at an attractive valuation and accelerate our debt reduction targets. 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."
