Carlyle to Buy Tyco South Korea Unit for $1.93 Billion

Carlyle Group LP agreed to buy Tyco International Ltd.’s fire and security business in South Korea for $1.93 billion, the country’s largest private-equity buyout deal in U.S. dollar value in more than five years.

Tyco is selling Tyco Fire & Security Services Korea Co. and units that form the ADT Korea security business, the company said today. Switzerland-based Tyco said net cash proceeds are expected to be $1.85 billion, and the board added $1.75 billion to its stock buyback authority, for a total of $2 billion.

“ADT Korea is a highly stable and profitable business with attractive market positioning, strong brand power and excellent cash flow profile,” Sanghyun Lee, managing director on the Asia buyout team for Washington-based Carlyle, said in a statement. Lee said South Korea’s security industry is “under-penetrated.”

Carlyle’s purchase follows investments of more than $920 million of equity in 17 transactions in South Korea as of Dec. 31, 2013 and is also the largest private-equity buyout in the country since 2008, according to the company. The firm’s current and former investments in Korea include KorAm Bank, Hyundai HCN, EO Technics, Tapex and Yakjin Trading.

Equity for the transaction will come from Carlyle Asia Partners IV and Carlyle Partners VI, Carlyle said. Carlyle Group has committed debt financing from Korea Exchange Bank, Kookmin Bank, Industrial Bank of Korea, Korea Investment & Securities and UBS AG.

Stock Reaction

Carlyle fell 2.1 percent to $35.50 at the close in New York as major U.S. indexes declined. Tyco rose 2 percent, the fifth-largest advance on the Standard & Poor’s 500 Index, to $43.02.

Tyco provides more than 3 million customers with fire protection and security products and services, according to the company. About 19 percent of its $10.4 billion in revenue in fiscal year 2012 came from the Asia-Pacific region. Tyco considers itself the world’s largest “pure-play fire protection and security company,” while ADT Korea has about 475,000 customers.

ADT Korea is expected to have revenue of about $600 million in fiscal 2014, and operating income of $125 million, Tyco said. About 5 cents of earnings per share in the fiscal second quarter will be reflected in discontinued operations as a result of the deal, the company said. EPS from continuing operations before special items will probably be 39 cents to 41 cents, down from a forecast of 44 cents to 46 cents, it said.

Monitoring Services

ADT Korea provides central monitoring services, with video surveillance and response, as well as customized security and guard services. The unit, headquartered in Seoul, has about 7,500 workers.

Selling the Korean unit is “a unique opportunity to realize the value generated in the business over time and redeploy it to further enhance our portfolio and maximize shareholder value,” Tyco Chief Executive Officer George Oliver said in the statement.

Carlyle reported a 79 percent increase in profit last year as its portfolios gained in value and it seized on rising stock markets to sell holdings. The company was founded by William Conway, Daniel D’Aniello and David Rubenstein.

The firm sold shares of railway operator Genesee & Wyoming Inc., French cable operator Numericable Group SA and ratings company Nielsen Holdings NV, in addition to completing sales of aviation-information company Arinc Inc. and German software maker P&I Personal & Informatik AG, both of which returned more than 4.5 times the investment by Carlyle and its limited partners.

The Tyco deal is expected to be completed in the second quarter of this year, Carlyle said.

Clifford Chance and Lee & Ko are legal advisers on the transaction for Carlyle, while Morgan Stanley acted as Tyco’s financial adviser and Simpson Thacher & Bartlett LLP was the legal adviser.

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