Monitronics International to Acquire Security Networks
Ascent Capital Group, Inc., ("Ascent") announced today that its primary operating subsidiary, Monitronics International, Inc., (“Monitronics”), has signed a definitive agreement to acquire Security Networks, LLC, resulting in a leading home security solutions provider with greater scale, an expanded footprint and enhanced growth prospects.
Founded in 2000, Security Networks provides monitored security system services to approximately 195,000 residential and commercial customers, making it the 14th largest residential alarm monitoring company in the U.S.1 Similar to Monitronics’ business model, Security Networks utilizes a network of exclusive dealer affiliates to sell and install the security systems it monitors.
The transaction consideration will consist of $487.5 million of cash and 253,333 newly-issued shares of Ascent Series A common stock with an agreed value of $20 million. The purchase price is subject to adjustment at closing and is based upon Security Networks delivering recurring monthly revenue (as defined in the acquisition agreement, “Acquisition RMR”) of $8.8 million. The transaction will be financed primarily with new debt at the Ascent and Monitronics levels, as well as an incremental amount of cash from Ascent's balance sheet. The transaction is expected to close in mid-August 2013, subject to customary closing conditions, including regulatory approvals.
Ascent’s Chief Executive Officer, William Fitzgerald, commented, “Security Networks provides many of the characteristics that originally attracted us to Monitronics, including a high-quality, subscriber portfolio, a scalable business model, a very productive dealer affiliate network providing strong account growth and attractive recurring monthly revenue that generates significant, steady, state-free cash flow. This combination of two very successful home security industry leaders positions us for accelerated growth and ongoing strong profitability. In addition, we expect the combined operations to provide enhanced borrowing capacity that will allow us to substantially fund the acquisition with incremental debt, delivering attractive value for our shareholders over time.”
As of June 30, 2013, Security Networks reported Acquisition RMR of $8.4 million (including approximately $0.1 million of wholesale monitoring). For the twelve months ending December 31, 2012, Security Networks generated revenue of $78.5 million and Adjusted EBITDA2 of $46.5 million. The company maintains a strong account base with an average credit score of 720 and life cycle attrition levels in line with Monitronics’ current portfolio.
Mike Haislip, president and CEO of Monitronics, stated, “We are very excited about this transaction and want to welcome the Security Networks dealer affiliates and customers on board. The combined company will have an impressive network of over 600 dealer affiliates nationwide and will service over one million subscribers. As we integrate the two companies, we expect to generate meaningful synergies from the combined operations. We expect the integration to be
seamless and will make certain that our customers and dealer affiliates remain top priorities and continue to receive the high-quality service that they have come to expect.”
Richard Perry, president and CEO of Security Networks, added, “Monitronics is a well-respected company and one that has a proven track record of growth in the home security market. I am confident that this transaction is the right next step for our business, creating a compelling growth platform and offering greater value to our customers. I would like to thank Oak Hill Capital Partners for their partnership, guidance and market acumen. Together, we have helped to shape Security Networks into the dynamic business it is today.”
Security Networks has been named to SDM Magazine’s Top 100 list of U.S. security firms for seven consecutive years and was SDM’s Dealer of the Year Honoree over the past two consecutive years. The company was also named to SD&I Magazine’s Fast50 in 2012, which recognizes America's fastest growing systems integrators.
Jonathan Friesel and Benjamin Diesbach, Partners at Oak Hill Capital, jointly commented, “During our partnership with Security Networks, we enjoyed working closely with Rich Perry and his team to build the company into a leading provider of home security solutions. Security Networks and its affiliates are well-positioned to maintain their impressive growth and leadership in the residential home security market under their new ownership.”
Following the close of the transaction, the combined companies will be headquartered in Dallas, Texas, with Mike Haislip serving as CEO.
1 According to SDM Magazine’s SDM100 rankings issued in May, 2013.
2 For a definition and explanation of Adjusted EBITDA, please refer to the Company’s public investor presentation posted on July 10, 2013 on the Ascent Capital Group, Inc., investor relations site at http://www.ascentcapitalgroupinc.com/Investor-Relations.aspx.