Tyco Sells Korean Business To Carlyle For $1.9B

NEW YORK (The Deal) -- Carlyle Group LP prevailed in an auction with an agreement to pay $1.93 billion for the South Korean security operations of Tyco International (TYC).

Carlyle said on Monday that it will buy Tyco Fire & Security Services Korea Co. Ltd. and its three subsidiaries, collectively known as ADT Korea, from Tyco for just under 11 times forecast 2014 Ebitda of $180 million.

"ADT Korea is a highly stable and profitable business with attractive market positioning, strong brand power and excellent cash flow profile," said Carlyle Asia buyout managing director Sanghyun Lee in a statement. "Korea is one of the few countries in Asia that generate stable economic growth along with consistent deal flow of large buyout transactions."

Tyco said it expects to net $1.85 billion in cash from the sale and said the deal would cost it about $0.20 of earnings per share, per annum. Tyco's board said it would use the funds to increase a previously announced share buyback by $1.75 billion to $2 billion.

Seoul-based ADT Korea provides security services to about 475,000 businesses and residential customers and operates 69 outlets. The company is expected to post sales of $600 million in 2014, up from $560 million for 2013. It has an operating margin of about 21% and an Ebitda margin of 30%.

"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 in a statement.

Neuhausen, Switzerland-based Tyco spun off much of its security operations in 2012 when it listed its U.S. business, ADT Corp., as part of a wider effort to shed its conglomerate heritage and focus on safety equipment and fire-fighting systems.

Tyco bought a 68.5% stake in the South Korean unit, then called Caps Co., in 1999, before acquiring the rest of the company and delisting it in 2012.

The Swiss company approached a handful of private equity shops at the end of last year as it looked for a buyer for the South Korean unit. Reports in January said it had shortlisted Carlyle, Kohlberg Kravis Roberts & Co., Bain Capital LLC and IMM Private Equity Inc.

Carlyle, led by co-founder and CEO David Rubenstein, said that equity for the transaction will come from two of its funds, Carlyle Asia Partners IV and Carlyle Partners IV. Carlyle has been one of the most active U.S. funds in South Korea, where it had struck 17 acquisitions up until the end of last year, amounting to a total equity investment of more than $920 million.

Carlyle's debt for the ADT Korea deal will be provided by Korea Exchange Bank, Kookmin Bank, Industrial Bank of Korea, Korea Investment & Securities and UBS. It took legal advice on the deal from Clifford Chance LLP and Lee & Koh.

Tyco took financial advice from Morgan Stanley. Legal counsel was provided by Simpson Thacher & Bartlett LLP and Kim & Chang.

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