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Will UTC buy Nortek?

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Wednesday, August 26, 2015

Will UTC buy Nortek?

The Wall Street Journal, citing unnamed sources, says it's in talks to do so for around $1.2 billion. I talked to some folks in the past few days who say the purchase, which may not make sense on the surface may indeed make sense. Other financial reports, such as the Motley Fool, concur.

Nortek is the parent company of well known access control, security and automation brands Linear, 2GIG and Go!Control. Those brands fall under the Nortek Security and Control division. It's  a global diversified company with a current market cap of $1.3 billion and an enterprise value of $2.7 billion, and the bulk of Nortek’s business falls outside security, it also does HVAC, air management and AV.

Based in Hartford, Conn., United Technologies Corporation is a global $81 billion company that makes building systems and aerospace industry products. Its segments include:  Otis elevators; Pratt & Whitney;  UTC Aerospace Systems and UTC Climate, Controls & Security, which in addition to security does HVAC and refrigeration. UTC owns access control provider Lenel (as one person I spoke to called it--the darling of the UTC security portfolio) and intrusion and smart home provider Interlogix.

UTC bought GE Security in 2010. Here's a Q&A we did at the time.  Two years later, UTC sold its fire and security integration business (Red Hawk) to a private equity group.

UTC recently sold its Sikorsky helicopter division for $9 billion, so they've got money to invest.

Neither Nortek nor UTC are commenting, but plenty of folks outside of the businesses are talking about it.

People I spoke to said that UTC went looking for Nortek—Nortek was not actively looking for a buyer. They don’t believe that it is the security part of the business that is necessarily driving the deal—but rather, the fact that Nortek’s lines of businesses line up with UTC’s Climate Controls and Security division, though there would definitely be some overlap with 2GIG and Interlogix.

As The Motley Fool explains it, what's driving the deal is that the numbers make sense.

From the report: “…Nortek could be a pretty nice bargain. Bought for today's $1.4 billion valuation, Nortek would cost UTC less than 0.6 times Nortek's annual sales. UTC stock, in contrast, costs more than twice as much, at 1.3 times sales.
Meanwhile, although it earns no net profits, Nortek does earn operating profits (i.e., it would have been profitable but for the cost of interest, taxes, and various one-time items). In fact, at its current operating profit margin, Nortek earned about $123 million in operating profit on its revenues last year. If, after buying Nortek, UTC is able to improve the latter's operations so as to extract something like the 16.5% margin that UTC's own Climate, Controls, and Security business achieves, then this would work out to $413 million in annual profits from UTC's new subsidiary -- $290 million better than Nortek made on its own.”

Will the deal happen? I have no idea. But I guess I need to be prepared for another ISC West booth visit where I have to learn, again, how the UTC security business has been realigned.

 

The biggest and the newest at ISC West

IDIS, a newcomer to ISC West, has one of the ten largest booths at the show
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03/18/2015

LAS VEGAS—At the 2015 ISC West show, exhibitors put a lot of thought into their booths—rather literally with Hikvision’s “Thought Theater”—and some companies, like IDIS, are using big booths at ISC West to introduce themselves to the industry.

Guardian increases tech efficiency with mobile app

MASmobile Technician means the company’s techs spend less time on the phone, more with customers
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05/14/2014

WARRENDALE, Pa.—A new mobile app that Guardian Protection Services’ technicians are using has dramatically streamlined their work schedules, giving them more time to devote to customers, according to Randy Tecza, Guardian VP of operations.

Emergency messaging explained

New guidelines to help installers and end users in all 'rapid onset events'
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05/13/2014

QUINCY, Mass.—Emergency communication systems (ECS) were developed because a fire alarm alone is not always sufficient to tell building occupants what to do in case of an emergency. But what exactly should an ECS message say? There have been no guidelines for that—until now.

Once IR spins off security division, will others follow?

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Wednesday, June 12, 2013

Once IR spins off its security division, will others follow? Poking around some investor conference info recently, I came across this tidbit on Seeking Alpha

“Stanley Black & Decker Chairman John Lundgren made an interesting revelation during his chat at the Electrical Products Group Conference yesterday. [The conference took place in late May]. The exec says the company will keep an eye on the spinoff from Ingersoll Rand of its security business to see if a similar move would make sense for SWK with its security business. On strategy: "Because if we are convinced a year or two years from now that we have got a 12x EBITDA business trapped in a 7 or 8x business, we will make it bigger."

Through my Stanley contacts, I asked Brett D. Bontrager, SVP and Group Executive, Stanley Security Solutions, for further comment on Lundgren’s statement. Bontrager declined comment saying that there was nothing more to say beyond what John Lundgren stated.

You may recall that Ingersoll Rand announced in December that it would spin off its security products business.  Here’s my story. The IR security business—which includes brands such as Schlage locks and other electronic and biometric access control products—will be a $2 billion company once it is spun off. The remaining IR business will be a $12 billion business.

Following the IR spinoff announcement, reports, such as this one from Bloomberg, speculated that the new standalone IR security company will present an acquisition target. This report said potential acquirers include Stanley Black & Decker (to add to its security businesses and further diversify from its power tools), Tyco (might be interested in IR’s commercial products but not its resi security products) and UTC. The report also notes that IR, which is headquartered in Swords, Ireland, presents certain tax advantages.

The IR spinoff was prompted by activist shareholder Nelson Peltz, whose Trian Fund Management owns about 7.3 percent of IR stock.

During ISC West, IR announced that Patrick Shannon will serve as senior VP and CFO of the new security spinoff and Barbara Santoro will serve as SVP and general counsel. They will report to the CEO, who has yet to be named.

Day 3 and done ISCWest 2013

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Monday, April 15, 2013

On Friday, April 12, Day 3 of ISC West, many were already heading to McCarren, but I was heading back to the show floor. And this year, though the crowd had thinned considerably, so were a lot of other folks.

Very decent crowd for Friday of ISC West.

While I had early rallies on Tuesday, Wednesday and Thursday, I didn’t have any official appointments until 10 a.m. on Friday. My first was with IMS/IHS’s Niall Jenkins. We caught up on a few things including plans for TechSec 2014. Yes, plans are underway, and Amy and I have some great ideas—you’ll hear all about them in September.

Next was a meeting with Matt Barnette of AMAG. I was supposed to go to the AMAG A&E and integrators’ event in March. Unfortunately, lengthy flight delays derailed that plan—so I spent some time catching up on some news announced at that event. AMAG is all excited about their new Symmetry SR series retrofit controllers, which can be used to convert competitor’s legacy systems to AMAG’s Symmetry solution. “Our engineers used our existing hardware platform and changed the form factor so it’s a direct pin for pin [upgrade] solution for traditional Casi Rusco solution,” Barnette said.

A couple of years ago, UTC (parent company of Casi Rusco) announced that it would end-of-life its Secure Perfect and Picture Perfect solutions and would transition those customers to a product called Facility Commander. AMAG considers this change in UTC’s roadmap as an opportunity to get those UTC (Casi Rusco) customers to instead transition to AMAG.

Back at the video studio, I did two more ssnTVnews interviews, one with Rob Hile, CEO of IFSS, an independent integrator in Florida and one with Levy Acs of American Integrated Security Group.

Hile and I talked about IFSS’s successful migration to a services-based model, and Acs and I did a follow-up interview on this story I wrote last month about his ambitious growth plans.

The rest of Friday was spent walking the show floor and hanging around the ssnTVnews studio chatting with folks who stopped by.

What was the theme of ISCWest 2013? There was continued talk about mobility and cloud. More manufacturers are figuring out how to offer the two and integrators are starting to see possibilities for making money offering the same. The big theme it seems to me, however, was optimism. There was a vibe at this show I haven’t sensed in many years and, frankly, it’s not what I was expecting after the not-so-crowded ASIS show last fall.

I heard the same from nearly everyone I spoke to. Good to see; nice to be a part of.

AES launches first phase of Interactive Security Services

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01/23/2013

PEABODY, Mass.—AES-IntelliNet, a provider of radio networks to the fire and security industry, is launching the first phase of its new Interactive Security Services, according to a company statement.

Standards bodies making progress

News from SIA, PSIA and ONVIF speak of strides being made
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06/21/2011

YARMOUTH, Maine—The security industry bodies that have stepped forward to advocate for a standardized future for physical security have all made moves and issued press releases recently that tout progress being made. SIA, PSIA and ONVIF all say that in the short time since ISC West, more and more compliant products have been released and have been demonstrated to work seamlessly together.

SSN’s top 10 stories of 2010

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12/22/2010

YARMOUTH, Maine—As 2010 draws to a close the editors at Security Systems News take a look back and see what the most read stories of the year were. What was making the news? What were you most interested in knowing?
Below is a non-sequential, categorized rundown of the top 10 most read stories on our site from Jan. 1 to Dec. 11, followed by a linked top 10 list.

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