Tyco International agrees to pay $5.6 billion for ADT Offer beats hostile bid by Western Resources

Security systems

March 18, 1997|By BLOOMBERG NEWS

EXETER, N.H. -- Tyco International Ltd. agreed yesterday to buy ADT Ltd. for $5.6 billion in stock, topping Western Resources Inc.'s hostile bid for the electronic security system company by 29 percent.

Tyco's $29-a-share offer, approved by directors of both companies, is expected to lead Western Resources to cancel its bid, analysts said.

Western, which said it is reviewing Tyco's offer, is ADT's largest shareholder with a 27 percent stake.

"They [Western] end up getting a good bid for their shares and they don't have to finance an acquisition," said Lawrence Alberts, an analyst with American Express Financial Corp., which holds about 400,000 Western shares.

ADT will add its top-selling U.S. electronic security systems and 230 offices in 10 countries to Tyco, which makes sprinklers and other fire-safety systems. The combined company would have 530 offices worldwide and annual revenue of about $7.7 billion.

Shares of Exeter, New Hampshire-based Tyco fell 2.125 to $58.125 in trading of 5 million shares, more than 10 times the three-month daily average.

ADT shares close up $3.875 to $25.875 in trading of 5.85 million. Western's stock rose 87.5 cents to $31.

Tyco's shares dropped partly because the purchase will not be tax-free to its shareholders, analysts said. Tyco said the acquisition will add to earnings within a year of its expected completion by July 1, though some analysts were less certain.

"ADT does have some corporate fat, but I'm not sure how quickly Tyco can turn it around," said Andrew Jeffrey, an analyst at Robertson Stephens.

Tyco, which also makes disposable medical products and electrical and electronic components, had a bid of its own rejected in January. American Standard Cos., a maker of air conditioners and bathroom fixtures, spurned Tyco's $4 billion cash-and-stock offer.

Tyco is in competition with Williams Holdings PLC to be the world's biggest fire protection and security company. Williams disclosed a plan Feb. 14 to buy Chubb Security PLC for $2.1 billion.

Western Resources is "not very likely to top" Tyco's bid, said Robin Deidrich, an analyst with Edward Jones. The Topeka, Kan.-based utility's plan to combine ADT's operation with sales of electricity and natural gas was an unproven strategy, analysts said.

Western helped foil a $4 billion bid for ADT by Republic Industries Inc. last year, and investors and ADT had said Western was trying to force ADT to accept a low offer of $22.50 a share.

ADT gave Republic Industries Inc. warrants to buy 15 million shares of ADT at $20 a share after Republic ended its offer in September. Republic hasn't said whether it will use the warrants before they expire later this month.

ADT adopted so-called poison pill provisions designed to thwart Western's bid. Western has been trying to have two of its executives replace ADT's entire board to push the bid through.

A Western lawsuit seeks to force ADT to call a meeting before July so shareholders can vote on the proposal to replace the board.

Western also is waiting for regulators to approve its plan to buy neighboring Kansas City Power & Light Co. for $2.7 billion in stock and assumed debt.

Pub Date: 3/18/97

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