Ascent Capital Group announced that its primary operating subsidiary, Monitronics International, has signed a definitive agreement to acquire Security Networks, resulting in a leading home security solutions provider with greater scale, an expanded footprint and enhanced growth prospects.
Ascent Capital Group announced that its primary operating subsidiary, Monitronics International, has signed a definitive agreement to acquire Security Networks, resulting in a leading home security solutions provider with greater scale, an expanded footprint and enhanced growth prospects.
Founded in 2000, Security Networks provides monitored security system services to approximately 195,000 residential and commercial customers, making it the 14th largest residential alarm monitoring company in the U.S.1 Similar to Monitronics' business model, Security Networks utilizes a network of exclusive dealer affiliates to sell and install the security systems it monitors.
The transaction consideration will consist of $487.5 million of cash and 253,333 newly issued shares of Ascent Series A common stock with an agreed value of $20 million. The purchase price is subject to adjustment at closing and is based upon Security Networks delivering recurring monthly revenue (as defined in the acquisition agreement, “Acquisition RMR”) of $8.8 million. The transaction will be financed primarily with new debt at the Ascent and Monitronics levels, as well as an incremental amount of cash from Ascent's balance sheet. The transaction is expected to close in mid-August 2013, subject to customary closing conditions, including regulatory approvals.
Ascent's Chief Executive Officer, William Fitzgerald, commented, “Security Networks provides many of the characteristics that originally attracted us to Monitronics, including a high quality subscriber portfolio, a scalable business model, a very productive dealer affiliate network providing strong account growth, and attractive recurring monthly revenue that generates significant steady state free cash flow. This combination of two very successful home security industry leaders positions us for accelerated growth and ongoing strong profitability. In addition, we expect the combined operations to provide enhanced borrowing capacity that will allow us to substantially fund the acquisition with incremental debt, delivering attractive value for our shareholders over time.”
As of June 30, 2013, Security Networks reported Acquisition RMR of $8.4 million (including approximately $0.1 million of wholesale monitoring). For the twelve months ending December 31, 2012, Security Networks generated revenue of $78.5 million and Adjusted EBITDA2 of $46.5 million. The company maintains a strong account base with an average credit score of 720, and life cycle attrition levels in line with Monitronics' current portfolio.