I was just getting used to the TV commercials for Motley Fool Hidden Gems recommendation Broadview Security (NYSE:CFL). You know, the ones where the Broadview name covers up the old Brinks Home Security name on signs and window stickers? After spinning out from parent company Brink's (NYSE:BCO) in 2008, Broadview was doing everything in its power to distance itself from the mining scandals associated with the Brink's moniker.
Well, its tenure as an independent company didn't last long. Tyco International (NYSE:TYC) has decided to buy Broadview for $2 billion in cash and stock, or $42.50 per share. The combination of Tyco's ADT Security business and Broadview will soon be known as just ADT.
Broadview's strength in home security monitoring should dovetail nicely with ADT's commercial security portfolio. Tyco sees $150 million in annual cost savings from the deal, and Broadview will add $0.07 to Tyco's earnings in the first year, and twice that in the second year of integration.
This buyout combines the two largest providers of monitored security services in North America, but the market remains competitive, and antitrust concerns don't really factor in. The top five providers own only 40% of the market, according to Broadview's SEC filings. Protection One (NASDAQ:PONE) and Stanley Works (NYSE:SWK) subsidiary Stanley Security Solutions are the only publicly traded companies in the sector, and both lag behind the Tyco-Broadview behemoth in market share.
In an interview with Bloomberg, Tyco CEO Edward Breen also noted that the company was looking to acquire a couple of other companies in the $300 million to $500 million range, across Tyco's security and fire and flow-control businesses.
As it happens, the $42.50 price tag for Broadview is just above what our Hidden Gems analysts thought the company was worth when they recommended it last May. Since then, we've seen a quick 46% return and a clean exit, as industrial behemoth Tyco clearly is too large to ever be a Hidden Gem.
Bye-bye, Broadview! I hope you didn't spend too much on that new signage.
Which companies might make a good strategic fit for Tyco's acquisitiveness? Leave your comments in the box below.
