For sale: Protection One

Third-largest alarm company hires J.P. Morgan to explore its options
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Monday, February 1, 2010

LAWRENCE, Kan.—Three days after the largest security company (ADT) announced it was buying the second-largest alarm company (Broadview Security), Protection One, the third largest alarm company, announced it is exploring its strategic alternatives, including a sale of the company.

“The financial markets are much stronger now than they were a year or so ago. Our company is performing well, and our balance sheet is in great shape,” Richard Ginsburg, Protection One CEO told Security Systems News. “We think it’s an opportune time to explore these alternatives and to maximize value for shareholders.”

Protection One has hired J.P. Morgan to advise the company on this process. The process involves “gathering those—newcomers and those who’ve expressed interest [in buying Protection One] in the past—to take a look at the company,” Ginsburg explained.

The process can take “two to four months, sometimes longer” and it could be “that nothing will come of it.”

Asked if Protection One’s majority owners, Monarch Capital and Quadrangle Group, are pressuring for a sale, Ginsburg said he couldn’t speculate about what the shareholders’ want. “I can tell you that we are under no financial pressure to do this.” He noted that Pro One received a $22 million payment earlier this year, and in November Pro One extended its credit facility and increased its available cash by $75 million.

He noted, however, that Monarch and Quadrangle “are going on six years of ownership. I don’t think it’s unreasonable for them to look to get liquidity after that many years, but there’s certainly no pressure.”

When companies explore strategic alternatives, they often keep it quiet. Ginsburg said he made the choice to go public because Protection One views this as a positive next step for the company and because he wants to “be open with our employees.” The day-to-day business will not change for employees or customers he said, adding that, “we’ve been through this before, in 2004, when we were sold by our owner Westar.”

Is Protection One still in acquisition mode, as it announced in December? Absolutely. “We have the capability and the desire to do acquisitions,” Ginsburg said. “Our acquisition team is primed and ready.”