Monitronics International acquires Security Networks
Ascent Capital Group, Inc., has announced that its primary operating subsidiary, Monitronics International, Inc., has signed a definitive agreement to acquire Security Networks, LLC, which will create a 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. Similar to Monitronics’ business model, Security Networks uses a network of 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 12 months ending December 31, 2012, Security Networks generated revenue of $78.5 million.
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 Honouree 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.
Following the close of the transaction, the combined companies will be headquartered in Dallas, Texas with Mike Haislip serving as CEO.