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How ADT's Spinoff Could Affect Google

5:45 PM -- The announcement on Monday seemed innocuous enough. The board of Tyco International Ltd. (NYSE: TYC; London: TYI) approved the spinoff of its North American ADT business, the market-leading provider of home security and automation services with 6.5 million customers. (See Tyco Shareholders OK ADT Spinoff.)

But there's a juicy cable angle to all of this, one that involves Motorola Mobility's Home unit and Google (Nasdaq: GOOG).

Tyco, also poised to spin off Flow Control International Ltd. (a maker of water and environmental control systems that clearly needs to come up with a better name), expects to complete the distributions on Sept. 28. The newly minted ADT Corp. would then start trading on the New York Stock Exchange (NYSE) under the symbol "ADT" on Oct. 1.

The most popular rumor is that Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Verizon Communications Inc. (NYSE: VZ) will make a play for ADT. (See Will Service Providers Steal ADT's Customers? and Comcast Goes Big With Xfinity Home .)

But ADT CEO Naren Gursahaney is pouring cold water on such speculation, telling Reuters, "We do intend to go it alone. We're going to be a stand-alone public company." That would still be true, even if ADT announced it was being bought on Oct. 2. But, in fairness, he did indicate that ADT could seek acquisition opportunities of its own.

The wacky cable angle
That's all fine and good, but here's where it gets fun.

The chairman and CEO of Tyco is Ed Breen, the same guy who used to head up Motorola Inc. and General Instrument Corp., key suppliers to the cable industry (Moto bought GI in 2000). Breen left the Comcast board last November because Tyco's connection to ADT created an apparent conflict when the MSO got into the home security business.

It's been suggested, then, that the spinoff of ADT would give Comcast an opportunity to buy ADT while also giving Breen a chance to extract himself from Tyco so he could get a group together to buy Motorola Mobility's Home unit from Google.

Industry sources have outlined a Moto-buying scenario involving Breen and a group that includes CommScope Inc. , another key MSO gear supplier. CommScope's founder and chairman is Frank Drendel, who, like Breen, is a longtime cable vet whom the cable guys trust. (See Will Moto Go Back to the Future?, Light Reading Poll: Who Will Take Motorola Home? and Google Taps Barclays to Shop Motorola Home .)

Interestingly enough, Drendel was just elected to serve as a director of Tyco starting on Sept. 28, the spinoff date.

All of these scenarios still seem about as complex and outlandish as they did six months ago, but pieces are falling into place to make them seem just a smidgen more believable.

— Jeff Baumgartner, Site Editor, Light Reading Cable

craigleddy 12/5/2012 | 5:20:44 PM
re: How ADT's Spinoff Could Affect Google

Despite all the intrigue of the relationships between the involved players, looks like ADT wants to see how much value they can get through the public spin-off. I guess that makes sense. If they can build up value and keep up the heat on their MSO competitors, then they could become more valuable as an aquisition target, should they decide to go that route.   

Jeff Baumgartner 12/5/2012 | 5:20:44 PM
re: How ADT's Spinoff Could Affect Google

Although ADT is giving this idea The Heisman, it makes a lot of sense for Comcast and/or Verizon (and perhaps even AT&T)  to make a play for ADT.  They've all recently launched home security/automation services, and those should serve as superb customer retention tools.  But they'll also have to be in this biz for a while before they can turn them into a material business.


Buying ADT would allow one of them to be tops in the market virtually overnight. And it's a fragmented market...According to a report from Sanford C. Bernstein issued ealier this year, the top three, led by ADT, together hold just 30 percent of the market. JB


 

Jeff Baumgartner 12/5/2012 | 5:20:43 PM
re: How ADT's Spinoff Could Affect Google

Meanwhile, Comcast has not offered any sub numbers for Xfinity Home, but company Vice Chairman and CFO Michael Angelakis said Wed. at the Goldman Sachs conference that the product is "embryonic in terms of where that penetration is," and that the highest ROI is to focus on the passings of that product, which is apparently avail. to about 42% of the Comcast network. JB


 

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