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Tyco International Ltd. said it plans to acquire anti-theft equipment maker Sensormatic Electronics Corp. in a stock swap valued at about $2.3 billion, expanding a security portfolio that includes ADT burglar alarms.
The deal calls for the exchange of $24 in Tyco common stock for each Sensormatic share. That represents about a 61-percent premium over Sensormatic's current stock price of $14.94. Tyco also would assume $116 million of Sensormatic debt.
Sensormatic makes a broad line of electronic surveillance products used in convenience stores and supermarkets. Its customers include 93 of the world's 100 largest retailers. The Boca Raton, Florida-based company, which generated revenues of $1.1 billion for its fiscal year ended June 30, also makes electronic article surveillance tagging for the retail industry.
For Tyco, the deal is the latest in a string of acquisitions that this year alone include purchases of medical device maker C.R. Bard Inc., financing firm CIT Group Inc., Simplex Time Recorder Co. and burglar alarm company SecurityLink. Tyco also owns ADT Security Systems, maker of probably the most recognized brand of burglar alarms.
Tyco CEO Dennis Kozlowski said he plans to nearly double Sensormatic's organic growth to a range of 10 percent to 12 percent by using ADT's 5,000-strong sales force to sell Sensormatic's products worldwide.
Sensormatic will become part of Tyco's fire and security products division, which generated third-quarter revenue of $2.68 billion, or 29 percent of Tyco's overall sales. Sensormatic also gives Tyco an opportunity to manufacture security products. Kozlowski envisions bolstering market share by offering customers lower-priced products.
Kozlowski said about 56 percent of Sensormatic's revenue comes from its electronic surveillance business. Sensormatic is twice as large as its nearest competitor in the $1.5 billion market.
In the $1.3 billion video surveillance industry, Sensormatic controls 20 percent of the market, Kozlowski said. And Sensormatic ranks second in the fragmented access control market with 12 percent market share. Kozlowski said Honeywell International Inc. is the industry leader with 25 percent of the market.
Tyco expects to close the deal by the end of October, pending approval from U.S. and European regulators.