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ADT Corp. Offers $1Bn Senior Notes

Zacks Equity Research

Security and protection services provider The ADT Corporation (ADT) recently announced a debt offering of $1 billion worth of senior unsecured notes due 2021. In accordance to Rule 144A, the notes will be offered and sold to qualified institutional buyers in the U.S.

ADT intends to utilize the proceeds from the offering to increase its liquidity and repay $150 million debt under its revolving credit facility. In addition, the company is likely to use the proceeds to fund its share repurchase program and for general corporate purposes like acquisitions.

In Nov 2012, ADT approved a $2 billion share repurchase program over a three-year period, pursuant to which 10.6 million shares were purchased in the open market for $43.74 each during the nine months ended Jun 28, 2013. The company also entered into a separate accelerated share repurchase agreement in Jan 2013, under which it repurchased 12.6 million shares for $600 million at an average price of $47.60 per share. Funded with proceeds from the Jan 2013 debt offering, this accelerated share repurchase program was completed in April.

In a separate development, ADT maintained its quarterly dividend of 12.5 cents per share. Over the years, ADT has consistently returned significant cash to its shareholders through dividends and share repurchases. The dividend is payable in cash on Nov 20 to shareholders of record as of Oct 30. Based on the closing price of $42.88 on Sep 23, 2013, the dividend offers a yield of 1.2%. Steady dividend payout is also part of the long-term strategy of ADT to provide attractive risk-adjusted returns to its stockholders.

Headquartered in Boca Raton, Flo., ADT offers electronic security products along with interactive home, business automation and monitoring services for residences and small businesses in the U.S. and Canada.

ADT has a Zacks Rank #2 (Buy). Other notable companies in the industry that warrant a look include Corporate Executive Board Co. (CEB), McGraw Hill Financial, Inc. (MHFI) and The Hackett Group, Inc. (HCKT), each carrying a Zacks Rank #2 (Buy).

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