Protection One considering sale

Jan. 20, 2010 -- Large national security installation and monitoring firm Protection One, which has been advertising that it is in the market to purchase accounts, announced today that it has hired J. P. Morgan to provide advice on a possible sale of the company. The company said in a statement to the media that "it is commencing a process to explore and evaluate strategic alternatives, including a possible sale of the company, in order to maximize shareholder value." Protection One qualified this news by saying there was "no assurance that this review of strategic alternatives will result in Protection One pursuing any transaction."

Protection One monitors over 1 million customers, has 60 branch offices, and has five monitoring centers in place (located in New Jersey, Kansas, Texas, California and Florida.) Ginsburg said the firm has recurring monthly revenues (RMR) of over $25 million, and projected annualized revenues of $370 million, a number which is based on the company's Q3 2009 revenues. The company is currently owned primarily by shareholders and two private equity firms -- Quadrangle Capital Partners and Monarch Alternative Capital.

In an interview with SecurityInfoWatch.com, president and CEO Richard Ginsburg said the company continually receives offers and notices of interest regarding possible sales from investment companies, businesses inside the security industry and potential players with businesses that are somewhat tangential to security and alarm services.

"I think it's the right time to launch a process and take a serious look [at a possible sale]," said Ginsburg. "We get inquiries from time to time, and to handle those inquiries properly, the right way to do it is to hire a banking company like J.P. Morgan."

Ginsburg said that Protection One was under no pressure to sell itself and that the news was in no way related to Tuesday's news of the ADT-Broadview Security deal.

"Our announcement had nothing to do with their announcement. It was something we planned for some time. … The company has firmed up its balance sheet pretty significantly in the past year. We have paid down a lot of debt, and we have a lot of cash on our balance sheets."

Ginsburg added that the firm has been able to be in acquisition mode due to a strong financial position. Two years ago, the company purchased IASG, a deal which contributes roughly $7 million to the company's RMR. The firm has been advertising to purchase accounts from dealers, and Ginsburg said that Protection One recently has made purchases in this area (although he says these purchase have not been big enough to warrant the issuance of press releases).

"We think we are in a good position to fill in our infrastructure with account purchases," said Ginsburg. "We have been doing ones quietly that don't really merit news. "

And for now, Ginsburg says that path will continue, even as they operate a formal process to consider available offers. He's optimistic about the growth of the industry, which he says has seen consistent growth since the early 1990s, creating a predictability that is often favored by investors.

"The operation of the company is sound; there is no pressure [to sell] other than to see what is out there and to report back to our shareholders."

Ginsburg added that he expects to see continued growth in the residential market, and even stronger financial growth in the commercial sector. He attributed the strength of financial growth in the commercial sector to the continued and heightened adoption of video surveillance and electronic access control technologies in addition to the standard fare of burglar alarm systems.

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