What happened

Shares of ADT (ADT -1.24%) leaped 16% on Tuesday after the home security solutions provider partnered with State Farm and deepened its relationship with Alphabet's (GOOG -1.65%) (GOOGL -1.60%) Google. 

So what

ADT and State Farm want to reduce the risks of homeownership. To do so, State Farm will provide up to $300 million in funding to accelerate the development of ADT's advanced security and smart-home technologies. The insurance titan will also invest an additional $1.2 billion for a roughly 15% equity stake in ADT and a seat on the company's board of directors.

"ADT's partnership with State Farm creates the capability to drive innovation in homeowners insurance on a broad scale," ADT CEO Jim DeVries said in a press release. "By delivering a truly connected home, together we can improve the customer experience and provide more peace of mind."

Under the terms of the deal, State Farm will buy 133.3 million shares of ADT's stock at $9 per share. To offset the potential dilution of existing shareholders' ownership stakes, ADT plans to conduct a tender offer for up to 133.3 million shares of its stock at that same $9 per-share price. ADT's majority shareholder, Apollo Global Management, has ensured that all shares offered will be purchased. The transaction is expected to be completed in the fourth quarter.

Google, which owns a roughly 6% stake in ADT, agreed to provide an additional $150 million to further spur the company's home-automation initiatives.

"A smart home should take care of the people in it while also helping to make sure they are protected and safe," Google Nest general manager Rishi Chandra said. "Our work with ADT is building the next generation of smart home security solutions."

Now what

Together with Google's data collection and analysis expertise, ADT and State Farm believe they can lower homeowners' insurance premiums by reducing the frequency of their claims for water, fire, and other damages.

"This partnership gives State Farm the opportunity to provide smart home technology that takes us from our 'repair and replace' model to a 'predict and prevent' mindset," State Farm Chief Operating Officer Paul Smith said.