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ADT Completes Acquisition of Independent Dealer Defenders

Zacks Equity Research

ADT Inc. ADT recently announced the closure of the buyout of its major independent dealer, Defenders.

The deal, worth about $381 million in total consideration, includes an offering of around 16.3 million shares of ADT’s common stock to Defenders’ founder, David Lindsey and Jessica Lindsey, in exchange for 100% of their ownership in the acquired company. Additionally, ADT paid another $260 million in cash to settle the current debt of Defenders, fund liabilities and transaction costs. As noted, the overall value of the deal is based on ADT stock’s closing price of $7.45 on Jan 3.

Based in Indianapolis, Defenders has long been ADT’s independent dealer, with annual sales of more than $600 million. Notably, the company employs around 2,900 employees in more than 130 field branch sites.

Acquisition Rationale

The acquisition is in sync with the company’s strategy of driving profitable growth over the long term. Notably, the buyout will allow ADT to create a simplified and unique platform, with enhanced marketing efficiency. Moreover, the deal will enable ADT to offer a complete suite of advanced home automation and security products to a larger customer base.

The company also anticipates an enhanced revenue payback period along with reduced costs for subscriber acquisition and new account gains from the combined ecosystem optimization. Further, the transaction is likely to bring in increased capital efficiency for the company in 2020.

Zacks Rank & Price Performance

ADT, which has a market cap of roughly $5.5 billion, currently carries a Zacks Rank #3 (Hold). In the past three months, the company’s shares have returned 19.4% compared with the industry’s growth of 6.4%.

Analysts have become increasingly bearish about the company over the past 60 days. The company’s earnings estimates for fourth-quarter 2019 have decreased from 22 cents to 21 cents on account of one downward estimate revision versus none upward.

Stocks to Consider

Some better-ranked stocks from the Zacks Industrial Products sector are Intellicheck, Inc. IDN, Cintas Corporation CTAS and DXP Enterprises, Inc. DXPE. While Intellicheck sports a Zacks Rank #1 (Strong Buy), Cintas and DXP Enterprises carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intellicheck delivered average positive earnings surprise of 4.76% in the trailing four quarters.

Cintas pulled off average positive earnings surprise of 8.50% in the trailing four quarters.

DXP Enterprises delivered average positive earnings surprise of 17.67% in the trailing four quarters.

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