Honeywell picks a winning bidder

GTCR tapped as prevailing suitor for security alarm business that has been on the block
Tuesday, June 1, 2004

CHICAGO - An on again, off again plan for Honeywell International to sell its alarm business could soon become a done deal, and the buyer is anything but a stranger to the security industry.

GTCR Golder Rauner has prevailed as the winning bidder for Honeywell Security Monitoring. GTCR previously provided financial backing for James Covert to start Cambridge Protection Industries and purchase SecurityLink from Ameritech and a number of other companies three years ago. GTCR agreed to pay $315.5 million for Honeywell’s alarm business, which serves an estimated 120,000 customers, of which approximately 75 percent are commercial. The deal is subject to regulatory approval but is expected to close by the end of June.

Security analysts called the transaction a positive move for the industry.

“It’s good for the industry to have another strong, independent national company that’s committed to putting capital to growing a significant business here,” said John Mack, president of USBX Advisory Services.

Honeywell first began looking for a buyer for its alarm business unit in 2001, but activity on that transaction was shelved as General Electric went after buying Honeywell. The business came back on the market last year, but the deal took months to complete. Industry sources said the deal went into three proposal rounds, with rumors that United Technologies Corp., Siemens and Brink’s Home Security were among the bidders.

Mark Hamel, spokesman for Honeywell, declined to release .the names of the bidding companies or how many vied for the business. “ There was substantial interest, and we’re not surprised by that,” he said.

GTCR came out on top, according to Hamel, because the company has experience in the security industry and is willing to invest in the business.

According to Collin Roche, senior principal of GTCR, the alarm company’s customer mix was one of the reasons the venture capital firm was interested in the acquisition.

“We liked all aspects of the industry, but the commercial side is very attractive, and we like seeing businesses that have balanced commercial and residential portfolios,” he said. “It’s been known for some time that Honeywell might not view this area as strategic given their role as an equipment vendor to the industry. We’ve been interested in acquiring the business for some time.”

Now with its traditional alarm business nearly sold, Honeywell plans to focus on the integrated security business. The company will continue to offer security, but on an industrial and heavy commercial level, with security systems that integrate with HVAC and building automation.

“The security monitoring business has not been a core part of our automation and control solutions segment,” said Hamel. “It’s been our strategy to focus on the high growth security products and integrated security solutions.”

Once the deal is complete, GTCR will use the Honeywell name for approximately a year. Roche also said GTCR is bringing onboard employees of the alarm business, including Gary Marcinkowski, vice president and general manager of the division. Marcinkowski joins 800 other employees in 45 locations who are expected to transition to the new, standalone company.