The numbers on the Protection One deal

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Thursday, June 17, 2010

LAWRENCE, Kan., and CHICAGO—Equity firm GTCR announced today the acquisition of Protection One, the second-largest security alarm company in North America, now that ADT and Broadview have combined. Our lead story has the ins and outs of the whys and whos, including interviews with ProOne CEO Richard Ginsburg, Michael Barnes, John Mack, and principal of GTCR David A. Donnini.

However, for those of you interested in raw numbers, here’s a breakdown of the deal, using numbers pulled from the press release, Yahoo Finance’s page on Protection One (PONE), and historical data from the Security Systems News archives.

EDIT (Feb. 27, 11 a.m.):

Because we were concerned that our RMR multiple number didn’t match that supplied by Barnes Associates in the interview conducted by Martha Entwistle for our main story on this acquisition, we explored a little deeper and went beyond the Yahoo numbers to the actual 10k reported by Protection One in its year-end results. You’ll see below some edits made to the numbers to reflect new information gathered.

Number of outstanding shares: 25.33 million

Purchase price times total number of shares: $392,615,000

Total debt: $447.63 million

Total cash on hand: $26.07 million

Yahoo way to look at the purchase price: $814,175,000 (shares times announced share price, plus debt, minus cash)

Total purchase price reported by GTCR in the press release, including refinancing of ProOne’s debt: $828 million

EDIT:

Why doesn’t the Yahoo number match the GTCR number? Because it doesn’t report a bunch of stock options that are going to be exercised in the deal. There are 2.2 million more shares that can be exercised, which adds another $14 million or so to the purchase price, which gets my $814 million from Yahoo to the $828 announced by GTCR.

Estimated RMR by Barnes Associates at the Barnes Buchanan Conference, held in Feb.: $26,327,000

EDIT:

RMR reported in the year-end 10k, which is less than at the end of the Q3 because it now reflects the sale of the Minnesota monitoring facility to APX: $25,057,000

GTCR price as a multiple of RMR (3Q number): 31.45x

GTCR price as a multiple of RMR (year-end number): 33.04x

Trailing 12 months revenue: $368,050,000

GTCR Price as a multiple of revenue: 2.5x

EBITDA: $90,380,000

GTCR Price as a multiple of EBITDA: 9.16x

ProOne closing share price on May 21, 2009, when ProOne’s price hit bottom: $1.99

Profit turned by someone who bought 1,000 shares of ProOne stock on May 21: $13,510

Amount Quadrangle paid Westec to buy 97 percent of ProOne’s stock in 2004: $122 million (when it did NOT assume all of the debt)

Amount Quadrangle cashed out with $3.86 per share dividend in 2006: $75 million

Growth of Protection One’s value since that Quadrangle purchase: roughly 575 percent (counting debt amount as part of “value”)