Honeywell vies for Silent Witness

Saturday, November 1, 2003

SYOSSET, N.Y. - Surveillance and cameras are key for Honeywell International, which announced in early October that it plans to buy Canadian camera manufacturer Silent Witness for approximately $66.4 million U.S.

If approved by shareholders, the deal would mark Honeywell’s third acquisition in the camera market and its largest acquisition in the security segment for some time. The company bought Ultrak CCTV for $36 million in late 2002, while it acquired TVS, a company that specializes in cameras for point of sale applications, earlier this year.

Buying Silent Witness will help Honeywell increase its depth of product offerings in the video surveillance market, said David Gottlieb, vice president, global marketing communications for Honeywell Security Group.

“Video is clearly a key component of security for commercial applications and it’s important that we have strong offerings in that area,” said Gottlieb.

According to a report from J.P. Freeman Co., video surveillance revenues are expected to grow between 15 to 20 percent per year through 2007 due to both technical advances and fall-out from the terrorist attacks of Sept. 11, 2001. In 2002, video surveillance revenues reached $1.2 billion in the United States alone.

Up until this year, Honeywell’s surveillance offerings had been limited, said Joe Freeman, principal of J.P. Freeman Co. “Ademco really never had a strong foot in the video side of the industry,” he said. “Silent Witness gives them that footprint in the industry.”

For Silent Witness, a public company known in the market as being an innovator, finding another company to join comes at an important time.

“There comes a point where size does matter,” said Rob Bakshi, chairman, president and chief executive officer of Silent Witness. “I think Silent Witness was at a pivotal point where it either had to get big by buying other companies or either find another company to merge with.”

But over the past few years, Silent Witness has sought that growth through acquisition.

The company made its first ever purchase in 2000 when it picked up the Welch Allyn’s Micro Imaging Device product line, providing the company with a mid-level camera line and technology that made it possible to manufacture smaller, less expensive cameras without compromising image quality and light sensitivity. Silent Witness then bought the Gyyr dome camera line in 2001, a transaction that included an important PTZ camera line that had yet to be developed by Silent Witness.

But while these endeavors were important to diversify Silent Witness, Brian Pow, vice president of research and equity analyst for Acuman Capital, speculated the company faced challenges when it came to integrating these acquisitions.

“The most expensive thing for them has been to enter new channels,” said Pow. “This is a good way to get products to channels and good for Honeywell to get good products behind them.”

Bakshi said Silent Witness had been approached in the past about a sale, but a transaction did not make sense until now. He said Silent Witness has been in talks with Honeywell for months, and the company’s board of directors have unanimously recommended Honeywell’s offer be accepted.

For the deal to go through, about 90 percent of the company’s shareholders need to tender their shares. Shareholders were expected to receive a mailing by the end of October asking for them to tender their shares, and would be given 35 days to do so.