Pro One sale final

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Monday, March 1, 2004

TOPEKA, Kan.—The long saga of the sale of Protection One ended in mid-February, when former parent company Westar Energy finalized its sale to New York-based investment firm Quadrangle Group LLC. Quadrangle paid Westar $122 million for Protection One, which comprises more than 2,300 employees and more than a million commercial and residential customers, and all of its debt. Westar acquired the company in 1997 for $320 million. For Richard Ginsburg, president and chief executive officer of Protection One, after 14 months of rumors about the company's future, the completion of the sale is a relief.

“I think it's a good thing for the process to be over with,” he said. “It's very distracting to be running a business that your majority owner is selling. There’s been a lot of speculation in the industry about what’s going on, so it’s a relief that that part of the process is over.”

After the transaction and a refinancing of its debt is completed, Westar will still have about $97 million in debt related to Protection One, according to Rosemary Foreman of the Kansas Corporation Commission.

“[The transaction] is not going to totally pay the credit line that Westar currently holds for Protection One,” she said.

“Our staff recommends issuing equity to eliminate that debt to protect rate payers from having to assume responsibility for that debt. The commission has been adamant that rate payers should not be left holding the bag for Protection One.” Karla Olsen, a spokesperson for Westar, said the company will issue stock to offset that debt.

“Stock issuance was always part of the original debt reduction plan—we said that was a possibility at the end of the steps—and we need to look at all the hard numbers and tax implications,” she said. Greg Bortz of financial firm Lehman Brothers said Quadrangle will take a different approach to operating Protection One than Westar did.

“Quadrangle will be a creditor as well as an investor, expect they believe strongly in the management team,” he said.

“Hopefully, with improved capital structure they will improve their strength. There’s still work ahead.” Ginsburg said he doesn’t anticipate many changes as Protection One transfers to Quadrangle, with the exception of having to find new headquarters. The company’s 63 employees in Topeka have been based in Westar’s corporate headquarters for a number of years. Protection One has deferred interest payments on some of its bonds while it figures out how to restructure its balance sheet, Quadrangle said in a statement.