Huizenga Will Buy ADT in $5-Billion Deal
H. Wayne Huizenga picked two businesses of the future--security and used cars--after selling off his brainchild Blockbuster Video, and on Monday he put together a $5-billion deal to buy a company busy in both areas.
Republic Industries Inc., Huizenga’s takeover vehicle, would become an instant market leader by buying Bermuda-based ADT Ltd., a burglar alarm and auto sales company with $1.53 billion a year in revenue.
“We’ve got a big appetite,” said Republic spokesman Ron Castell. “We work for a guy that’s got an even bigger one.”
To many investors, Huizenga has a golden touch for building empires out of video rentals (Blockbuster) and trash (Waste Management, now WMX Technologies) by establishing national brands in splintered high-growth industries. That’s just what Huizenga said he seeks to accomplish with the ADT acquisition.
Since selling Blockbuster to Viacom in 1994, he has extended his interests through Republic to theft protection, auto sales, solid-waste hauling and extended-stay hotels. He also owns three Miami professional sports franchises.
ADT has been an attractive takeover candidate in consolidating industries, said R. Jackson Blackstock, an analyst with Donaldson Lufkin & Jenrette, who said the announcement came “as a very nice surprise.”
On the news, ADT shares shot up more than 20%, rising $3.875 in active trading to close at $22.875 a share Monday on the New York Stock Exchange. Republic fell more than 8% on Nasdaq, dropping $2.375 to wind up at $26.75 a share.
In New York, Moody’s Investors Service, a leading credit-rating agency, said it would review ADT in light of the merger agreement and the possibility that ADT’s future cash flows might be diverted to other units of Republic.
With other acquisitions pending, Huizenga projects Republic’s profit will climb about 30% a year, and ADT will add 20 cents to 30 cents a share in annual profit.
The deal developed quickly, with Huizenga arranging a breakfast meeting with ADT Chairman Michael A. Ashcroft two weeks ago, and formal talks starting Thursday.
“We went over and had our first meeting, and the chairman’s attitude was, ‘That’s interesting, and let me think about it,’ ” Huizenga said. “The more we both talked, the more we liked it.”
ADT is the largest provider of electronic security services in North America and Britain with 1.4 million customers. It runs the second-largest used-car auction house in the United States.
About 70% of ADT’s security business is commercial, whereas Republic’s Kertz Security Systems serves about 200,000 clients, 80% residential.
“The big growth is in residential because presumably most businesses already have some kind of security,” Castell said. “There’s more to it than just crime. We can monitor your hot water heater too.”
Republic bought into the home security business in August and plans to open its first AutoNation USA superstore offering used, late-model vehicles with warranties this fall.
