ADT rejects pounds 2.1bn offer as inadequate
Thursday 09 January 1997
In a letter to shareholders, the ADT board said it had reached a preliminary view that the $3.5bn (pounds 2.1bn) offer by Western Resources was inadequate. It also suggested that it had received inadequate information about the proposed acquisition.
Based in Bermuda, ADT is led by the British home alarm and car auction entrepreneur, Michael Ashcroft. Last summer, the company was courted by another US home-alarm company, Republic Industries, which is headed by the flamboyant founder of Blockbuster Video, Wayne Huizenga.
Yesterday's letter suggests that the battle for control of ADT will be a drawn-out affair. In announcing its bid in December, Western Resources signalled its intention to arrange an immediate meeting of ADT shareholders to vote through the takeover and replace the ADT board.
Instead, ADT yesterday said that it would be scheduling a special general meeting of shareholders only in July. A notice of the meeting was also sent to stockholders.
The Republic offer for ADT was considerably more valuable for Mr Ashcroft and was priced at closer to $5bn. It was abandoned in August, however, when Republic suffered an unexpected downturn in its share values. Mr Huizenga has since concentrated on expanding his rental car interests, recently announcing the acquisitions in the US of both the Alamo and National rental fleets.
ADT is still the largest supplier of security and alarm equipment and services for commercial and residential properties in the US, with over 1.7 million customers. It is also America's second-largest car auction company with some 27 auction centres around the country.
Western Resources, however, has been striving to grow in the alarm industry. In December it purchased Westinghouse Electric, also a security business, for $368m. If it succeeds in absorbing ADT it would become almost unassailable as the dominant player in the industry in Britain and the US.
The hostile move against ADT followed several unrequited attempts by Western Resources to begin negotiations for a friendly merger. Western wrote to the ADT board at the time saying it could no longer ignore the benefits that a combination of the companies would promise to both their sets of shareholders.
In its letter yesterday, ADT also noted that it would be taking a one- time charge of $110m arising from its recent acquisition of Automated Security Holdings. The integration of the new business into ADT should bring about significant future cost savings, the letter said.
ADT will also report a $50m gain from a sale of its remaining holdings in Limelight.
News of ADT's rejection of the Western Resources offer cast a slight chill on its shares in morning trading in New York. At the lunch hour, ADT stock had edged down 12.5 cents to $22.265. Shares in Western Resources by contrast rose 25 cents to $31.25.
Separately, it was reported yesterday that Ford Motor Company is preparing to sell its Budget Rent a Car concern.
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