What now for ADT?

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Monday, July 1, 2002

PEMBROKE, Bermuda-Conglomerate Tyco's deflating stock price has broader implications than just affecting the organization's corporate operations.

At press time, according to one industry source, ADT Security Services had reportedly halted bidding on small acquisitions temporarily, now that its parent company is short on cash.

And some industry insiders say there is already talk that the ADT division is on the block and its current authorized dealer program, which taps $800 million to run, could be in jeopardy in its current form.

"There are already reports in the industry that certain companies are already looking at ADT, " said Jack Mallon, a security industry analyst from Mallon & Associates.
If that's the case, Mallon believes it would actually be a good move for the security industry.

"It's going to help the security industry," he said. "It's going to put these big pieces in play. It's going to enable some of the second tier companies to become more dominant."

Tyco owes $24 billion before the end of 2003, money company officials hope to partially come up with through a public offering of CIT stock and by cutting corporate costs. (See related story)

Still, said Steven Altman, an analyst with Commerzbank in New York, Tyco officials are likely devising an alternative strategy in case the company falls financially short.

"They have to be formulating a plan, as far as alternative sources of assets," said Altman. "You have to pretty much consider everything is for sale at the right price."
The sale of CIT, said Mallon, will only meet Tyco's immediate debt needs since the public offering is only expected to raise about $6 billion.

"As the pieces go out there it will enable the other players to get stronger or it will enable some of the non-security players, like some of the defense companies, to perhaps move into security," said Mallon.