Is Abry ready to divest itself of monitoring leader Monitronics?

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Friday, August 6, 2010

DALLAS - While neither Monitronics, nor Abry Associates, owner of Monitronics, has commented on last week's report that Monitronics is up for sale, one security industry consultant told Security Systems News there are indications Abry is ready to sell, and speculated about potential buyers.

Abry may be looking to reap what it has sown over an unusually lengthy relationship with Monitronics, according to security industry consultant Jennifer Holloway, president of Holloway Security Consulting and formerly in accounts acquisition with Protection One.

"Private equity doesn't like being in a business for more than five years,' Holloway said, noting that Abry had been in the Monitronics picture since 2001. "What I did hear was that they're not planning on selling, but that this was just a way to try and raise some money … But realistically who's going to put in another $100 million in new money from a new source and only get 10 percent equity or ownership in the company? No one. The other company's been in there too long.'

Holloway cited Abry's recent sale of other properties, including broadband and VoIP company CapRock Communications for $525 million and corporate co-location services provider CyrusOne also for $525 million. Holloway said sources had also reported the imminent sale of Abry holding United Health for likely north of $1 billion.

Could Monitronics be next?

In speculating on potential buyers, Holloway said the limiting factors were who had the money and who was a good fit: "Is it going to be private equity or one of the players in our space? If you look at the Top 10 List, there's not many people out there. There's Stanley. Well, that's not their focus. APX. That's not their focus, either … I don't know that there's going to be another security player who's going to be able to step in,' Holloway said.

"The likely outcome will be private equity. And I think the recent move with GTCR with Protection One created some buzz in the private equity world: ‘Hey, these guys thought this was a good place to put quite a lot of money.''

Abry put Monitronics on the block in 2003, and a 2007 story from Security Systems News reported on an $800 million refinancing deal Monitronics had achieved with a private investor. "This was a private transaction that we're very excited about because it gives us the financing we need to grow the company for at least five years and maybe more,' said Monitronics president and CEO Mike Haislip, at the time.

Holloway said there were a few reasons why now would be the time for Abry to cash in on its investment in Monitronics. "If you look at the last few years, it hasn't been a good to time sell anything. So you're just going to hold on and wait for things to get better,' Holloway said. "The other thing to consider is the capital gains tax laws are likely to change. So cap gains right now are at 15 percent, but will be unknown after the end of the year … if you're planning on taking your chips off the table, before year's end would be a good time to do that.'

Abry is a Boston-based firm focused on media, communications, business and information services investing. Investment firms Citi and Moelis & Co are reportedly advising in the sale.

Holloway said a sale of Monitronics could lead to a couple different outcomes. "I think if they can make the transition to a new buyer and keep the dealer network in place and keep everything moving forward and ramp up the growth - doing the things that Monitronics has been doing over the years - it's going to be good for them,' Holloway said. "If they get a buyer who just wants to eliminate a competitor, that's not good for anyone. They have some smart folks in their executive offices over at Monitronics.'