Stanley to buy resi company for $61m

Purchase expected to close in September
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Thursday, August 4, 2011

EDMONTON, Alberta—In a deal that will give Stanley CSS a major residential security footprint in Canada, Stanley Canada Corporation, a subsidiary of Stanley Black & Decker, Inc. has entered into an agreement to acquire Microtec Security Systems, headquartered here, for $61.6 million ($59.7 million Canadian).

The deal includes close to 80,000 accounts, two UL-Canada listed central stations, five offices, 200 employees and many dealers, said Fred Fong, CEO and president of First National AlarmCap Income Fund, owner of Microtec.

Stanley Black & Decker declined comment on the deal, which is expected to close in September.

While Microtec is headquartered here, most of the business is located in the province of Quebec. “There are probably 8,000 to 9,000 accounts outside of Quebec and the rest are in the province of Quebec,” Fong said. “In Quebec, we have a mix of internal sales and a dealer model. Outside of Quebec, we use the dealer model only.”

Microtec has other sales offices in Gatinueau, Trois Rivieres, Quebec City and Montreal.

Eighty-five percent of Microtec’s business is residential. Microtec uses a mix of DSC and Honeywell products, Fong said.

Michael Barnes, a partner in the investment banking firm Barnes Associates, which specializes in the security alarm industry and co-sponsors the Barnes Buchanan conference, said Microtec “looks like a good deal for Stanley, as both a mechanism for doing something larger in Canada, and obtaining more dedicated capabilities in the residential sector.”

Will Stanley, which made a play for Securitas Direct earlier this summer, and is currently in the process of a major commercial buy with its $1.2 billion bid for Niscayah, also try to expand its residential presence in the U.S.?

Barnes said, “It seemed clear that they wanted to get into the residential market, but they weren’t able to jump in through acquiring Broadview, Protection 1, Monitronics, or the other large U.S. players that have traded recently. Presumably, this was due to their being consumed with the Black & Decker deal. Time will tell as to if, or how, they will get some major traction in the U.S. residential space.”

First National AlarmCap Income Fund is an unincorporated, open-ended, limited purpose trust listed on the Toronto Stock Exchange. The main reason for its interest in selling Microtec is because of income tax rule changes in Canada. Until February of this year, the fund formerly owned Securex, an alarm company, which operated in the western part of Canada. It sold Securex back to its former owner, SMLP.

Stanley approached AlarmCap about the possibility of purchasing Microtec, Fong said,

The deal needs shareholder approval, regulatory approval and traditional bank approval. The deal is unanimously supported by the Trustees of the Fund. Fong expects the shareholder meeting to take place in the middle of September “and the closing to take place very quickly after that.” He does not anticipate any roadblocks in the process.