Tyco Int'l To Sell South Korean Home Security Unit To Carlyle Group For $1.9 Bln

(RTTNews) - Swiss security products maker Tyco International Ltd. (TYC) agreed Monday to sell its South Korean home security unit or ADT Korea, to private equity giant Carlyle Group LP (CG), in an all-cash deal valued at about $1.93 billion.

The deal, which is expected to close in the second quarter, is subject to customary closing conditions including required regulatory approval.

"We are pleased to announce the sale of ADT Korea in a transaction that provides value to our shareholders. While ADT Korea is healthy and profitable, this transaction represented a unique opportunity to realize the value generated in the business over time and redeploy it to further enhance our portfolio and maximize shareholder value," Tyco CEO George Oliver said.

The deal is billed as the largest private equity buyout deal in US dollar value in Korea since 2008. The deal also establishes Carlyle's long-term commitment to Korea since the establishment of Carlyle Korea in 1999. Carlyle has already invested more than $920 million of equity in 17 deals in Korea as of December 31, 2013.

The deal includes the sale of Tyco Fire & Security Services Korea Co. Ltd. and its subsidiaries ADT Caps Co., Ltd., Capstec Co., Ltd. and ADT Security Co., Ltd.

The South Korean home security unit, known as ADT Caps was established in 1971. The unit provides central monitoring services, access control, video surveillance, and other integrated security solutions. ADT Korea is expected to generate revenues of about $600 million and annual earnings contribution to Tyco of about $0.20 per share in fiscal 2014.

For the deal, Carlyle has secured committed debt financing from Korea Exchange Bank, Kookmin Bank, Industrial Bank of Korea, Korea Investment & Securities and UBS AG. Equity for the deal will come from Carlyle Asia Partners IV and Carlyle Partners VI.

Sanghyun Lee, Managing Director on the Carlyle Asia Buyout team, said, "ADT Korea is a highly stable and profitable business with attractive market positioning, strong brand power and excellent cash flow profile. We believe the Korean security services industry is under-penetrated, and growing awareness and needs for safety will anchor significant growth in the future."

South Korea is seen as a safe haven for investment by private equity giants as the investors can take full control of the assets, unlike in some other Asian markets where the bids could run into political opposition.

Tyco first bought a 68.5 percent stake in ADT Caps in 1999 and delisted it from Korea's Kosdaq stock market after acquiring the remaining stake later that year.

Tyco put up the unit for sale in 2013, attracting bids from several private equity firms such as Carlyle Group, KKR & Co. LP (KKR), Bain Capital, CVC Capital Partners, South Korea's MBK Partners and Hong Kong-based Affinity Equity Partners.

Tyco said the expected net cash proceeds of $1.85 billion from the deal will allow it to increase cash deployed for earnings-accretive activities, such as strategic acquisitions, share repurchases and organic growth initiatives, as well as other corporate purposes.

Tyco noted that it continues to execute on its three year strategy which positions it to deliver a 15 percent earnings per share compound annual growth rate in fiscal 2015.

Separately, Tyco announced that its board of directors approved an additional $1.75 billion share buyback authorization, in addition to the remaining $250 million from the earlier authorization.

TYC closed Friday's regular trading session at $42.18, down $0.39 on a volume of 2.73 million shares, while CG closed at $36.27, up $0.24 on a volume of 0.45 million shares.