Ultrak CCTV sale to Honeywell cleared

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Wednesday, January 1, 2003

LEWISVILLE, Texas -The final hurdle has been cleared regarding the sale of Ultrak Inc.’s CCTV business to Honeywell International Inc. of Minneapolis, a deal expected to close sometime before the end of 2002.

Ultrak shareholders approved the sale at a special meeting in late December.

The $36 million sale had been delayed for months due to a patent dispute between Ultrak, based here, and Lectrolarm Custom Systems, a Memphis, Tenn.-based company which designs and installs customized surveillance systems.

With the patent dispute resolved Ultrak’s CCTV business is now set to join up with the ranks of Honeywell and its Ademco Video division. Ultrak reached the licensing agreement with Lectrolarm in November after it was unable to secure a non-infringement opinion for a patent held by Lectrolarm.

Analyst Joseph Freeman of J.P. Freeman Co. said that Honeywell’s acquisition of Ultrak could be an indication of future transactions as Honeywell competes with General Electric for market share.

“You’ve got these two pretty powerful companies vying for leadership in the security industry…there is clearly a competition between GE and Honeywell,” said Freeman.

The sale from Ultrak’s standpoint makes sense, said Freeman, noting that Ultrak had been in financial straits for quite a long time, and the problem in the CCTV business is that it requires a great deal of capital.

Ultrak announced its original intention to sell in November 2000. At that time, the company was considering several alternatives due to consolidation in the industry and the rapid pace of technological change.

Over the next two years, several companies expressed interest in Ultrak, the most recent suitors being Gunnebo of Sweden, Silent Witness, and Novar. After negotiations with those companies were unsuccessful, Ultrak officials began to negotiate with Honeywell in May 2002.

On Aug. 8, 2002, Ultrak agreed to sell its CCTV business to Honeywell for $36 million, according to an asset purchase agreement filed with the Securities and Exchange Commission.

David Gottlieb, director of marketing communications for Ademco, a Honeywell company, said that Honeywell became interested in purchasing Ultrak’s CCTV business because “we felt it complemented Ademco Video.”

Freeman speculated that Honeywell will use the Ultrak and Ademco lines to cover two different aspects of the CCTV business. “(It) could be…that the Ultrak CCTV business is going through the integrative channel, where as the Ademco business specializes in dealers,” Freeman said. “The complementation could be in distribution, or it could be in unique products.”

In the future, Freeman speculated that Honeywell will acquire more businesses to keep pace. “Honeywell and everybody else knows that GE is on the acquisition prowl,” Freeman said. “If they are, then Honeywell has to defend itself, especially in the fastest growth area of the industry.”