-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UbzXXStSRtu+KELch8TZbTKYHDWTZxR1f6xtY9/HwZ9IHLfYbu5FwwqLghY+MK7X Mc81HknckY5KUoQAV94Hnw== 0000950103-97-000015.txt : 19970109 0000950103-97-000015.hdr.sgml : 19970109 ACCESSION NUMBER: 0000950103-97-000015 CONFORMED SUBMISSION TYPE: DEFA14A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19970108 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADT LIMITED CENTRAL INDEX KEY: 0000833444 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS BUSINESS SERVICES [7380] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEFA14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-13836 FILM NUMBER: 97502571 BUSINESS ADDRESS: STREET 1: CEDAR HOUSE 41 CEDAR AVE CITY: HAMILTON HM 12 BERMU STATE: D0 BUSINESS PHONE: 8092952244 MAIL ADDRESS: STREET 1: 2255 GLADES RD STE 421A CITY: BOCA RATON STATE: FL ZIP: 334310835 DEFA14A 1 SCHEDULE 14A (Rule 14a-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant [x] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [ ] Definitive Proxy Statement [ ] Definitive Additional Materials [X] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 ADT Limited (Name of Registrant as Specified in Its Charter) (Name of Person(s) Filing Proxy Statement, if Other Than the Registrant) Payment of Filing Fee (Check the appropriate box): [x] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: (2) Aggregate number of securities to which transaction applies: (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11: (4) Proposed maximum aggregate value of transaction: (5) Total fee paid: [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed: ADT LOGO ADT LIMITED Table of Contents A. Executive Summary B. Forces Shaping the Electronic Security Services Industry C. Overview of ADT's Electronic Security Services Business D. Initiatives for Future Growth Appendix: Why Shareholders Should Vote Against Western Resources' Proposal EXECUTIVE SUMMARY Executive Summary ADT Present and Future Number 1 electronic security services company in North America and United Kingdom. Recurring contractual payments from over 1.7 million customers currently generating $885 million of annualized revenues. Strategic redeployment of assets to focus on core electronic security business. - Pending sale of U.S. vehicle auction business - Sale of U.K. vehicle auction business - Acquisition of Alert Centre, Inc. - Acquisition of Automated Security (Holdings) PLC Shift from product focus to service focus: Changing image from a company that sells alarm systems to a company that provides customer-specific security solutions. Well positioned to capitalize on forces shaping the electronic security services industry. - Dominant market share position in growth industry - Opportunities to consolidate fragmented industry - Significant scale and scope advantages over competitors - Strong new initiatives to enhance role as service provider Executive Summary Key Characteristics of ADT's Electronic Security Services Business Leading market position with national service delivery High margin service industry Substantial operating leverage Strong cash flow generator Consolidating industry Significant growth opportunities Executive Summary ADT's Electronic Security Services Business: Geographic Breakdown GRAPHICS: PIE CHART PIE CHART CAPTION: 9 months 1996 Sales: CAPTION: 9 months 1996 $1,038.8 Million EBIT: $159.1 Million Illustrating: 24% Europe Illustrating: 19% Europe 76% North America 81% North America Forces Shaping the Electronic Security Services Industry Forces Shaping the Electronic Security Services Industry Industry Trends The electronic security services industry is consolidating, but remains highly fragmented. The top 100 companies account for approximately 23% of the $12.9 billion market.(*) Industry participants include ADT (the only national company), Ameritech, Honeywell, Borg-Warner and approximately 13,000 smaller local and regional companies. In recent years, there have been significant advances in the systems utilized by the electronic security services industry: - Improvement in computer and telecommunications technology including wireless - Wider use of semi-conductor components and microprocessor-based control panels - Development of digital communications technology - Allows transmission of voice and data signals over regular telephone lines - Eliminates the need for dedicated telephone lines and special circuitry - Reduces the cost of monitoring services to end-users and permits the monitoring of subscriber accounts over a wide geographic area from a single central monitoring station Larger, integrated electronic security systems companies who now have the ability to operate on a regional national basis now have a competitive advantage because they can achieve significant economies of scale. Ongoing (*)Source: Security Distributing & Marketing May, 1996 industry consolidation should enhance these economies of scale and build significant brand equity for the major industry players. Forces Shaping the Electronic Securities Services Industry Schematic Review of the Electronic Security Services Industry GRAPHICS
Initial Sale Ongoing Relationship ------------ -------------------- Product/ Product Sales End-User Alarm Monitoring System - Advent of - Price points - Average monthly Design digital & from $200 to rate is $24 wireless $2,000+ - Average customer - Lease terms life is 10 years are common - Contracts are - Smaller typically 2 to 3 operators years in length use minimal with renewal options advertising Manufacturing - Prices have Renewal (Sales) continually - Highly profitable fallen - Minimal incremental costs, full incremental revenues Installation Service - Average fee is - Larger companies $430 often bundle with - Some companies initial sale offer free or - Smaller firms often reduced-rate charge extra for an installation extended service in exchange contract for long-term monitoring contracts
Forces Shaping The Electronic Security Services Industry Fragmentation Persists Despite Recent Consolidation GRAPHICS U.S. Electronic Security Industry: Top 10 Industry Leaders 1995 12.9 billion ($ in billions) Pie Chart Illustration: $3.0 Represents Top 100 Providers $9.9 Represents Approximately 13,000 Other Providers Pie Chart 2.1 billion ($ in millions) Top 10 Providers ADT Pro Forma - $880 Borg - Warner (Wells Fargo) - $255 Republic Industries - $ 56 Protection One - $ 56 Westec Security - $ 62 Rollins Protective Services - $ 66 Brinks Home Security - $128 Westinghouse (Westar) - $150 Honeywell - $223 Ameritech(*) - $250 U.S. Electronic Security Industry: 1995 Revenue and Market Share Comparison Bar Chart ($ in millions) ADT/Alert Pro Forma $880 - 6.8% Borg-Warner (Wells-Fargo) $255 - 2.0% Ameritech* $250 - 1.9% Honeywell $223 - 1.7% Westinghouse Security (Westar) $150 - 1.2% Brinks Home Security $128 - 0.9% Rollins Protective Service $ 66 - 0.5% Westec Security $ 62 - 0.5% Protection One $ 56 - 0.4% Republic Industries $ 53 - 0.4% Source: Security Distributing & Marketing, May 1996. - ------------- (*) Includes the acquired business of National Guardian and Security Link. Forces Shaping the Electronics Security Services Industry Industry Leaders
Armed Armored Design Manufacture Sell Install Maintain Monitor Response Transport Comments ----------- ---- ------- -------- ------- -------- --------- -------- ADT Limited x x x x x Largest vertically integrated electronic security services company in the world. Reached one-millionth subscriber in 1995. Recently acquired Alert Centre (131,000 customers) and Automated Security Holdings PLC, primarily UK company (229,000 customers). Borg-Warner (Wells x x x x x x 146,000 subscribers Fargo Alarm Services) in 1995. Operates 37 branches, 15 satellite offices. Ameritech x x x x x Bought National (SecurityLink, Guardian in October National Guardian) of 1995 for $215 million. Emphasis on wireless alarms. 344,000 subscribers in 1995. Honeywell x x x x x Increasingly bundling security with home and building automation systems. 190,000 subscribers in 1995. Westinghouse Security x x x x x x Recently Systems (Westar) acquired by Western Resources. 376,000 total subscribers together with Western's Westar unit. Primarily residential provider. Operates 46 offices. Brink's Home Security x x x x x 378,700 subscribers in 1995. Opened five new offices for a total of 52. Employs 1,695 people. Rollins Protective x x x x x 120,000 subscribers Services in 1995. Operates 51 offices and employs 680 people. Westec Security Inc. x x x x x x 62,000 subscribers in 1995. Primarily West Coast operator, over 40,000 accounts in California; operates 13 offices. Protection One, Inc. x x x x x 141,000 subscribers in 1995. Acquired 36 firms (53,000 accounts). Recurring revenue increased by 68%. Republic Industries x x x x 150,000 subscribers in 1995. Purchased three major players: Kertz Security, Scott Security, and Denver Burglar Alarm (1996)
Forces Shaping the Electronic Security Services Industry Industry Sales: Strong Growth Expectations Key drivers of future growth include: - Public awareness of and concern about crime - Current low level of residential market penetration - Reduced insurance premiums for customers who have monitored security systems - Increased applications of existing technologies, including CCTV and access control - Digital and wireless technologies are reducing costs and making security systems affordable to a larger potential customer base GRAPHICS: Bar Graph Illustrating Industry Sales from 1988 through 1995 in billions CAPTION: U.S. Electronic Security Services Industry Sales CAGR = 8.7% 1988 - $ 7.2 1989 - $ 8.8 1990 - $ 9.7 1991 - $10.2 1992 - $10.6 1993 - $11.2 1994 - $11.9 1995 - $12.9 Source: Security Distributing & Marketing (May 1995 and May 1996). Overview of ADT's Electronic Security Services Business Overview of ADT's Electronic Security Services Business ADT Today Enjoys the largest market share and is well positioned to lead industry consolidation. Stock trades at near record high and has outperformed its competitors and the overall market. Core competency: service delivery. Technology intensive "data interrogation company". Increased emphasis on customer perspective in marketing and sales efforts. Strong established brand. Nationwide service capability. Expanding channels of distribution. Increasing financial strength. Focus on maximizing shareholder wealth. Overview of ADT's Electronic Security Services Business ADT Has Achieved Significant Market Share in the Electronic Security Services Industry ($ in millions) 1995 1995 Company Total Sales Total Subscribers - ------- ----------- ----------------- ADT Ltd.(*) 1092 1,214,000 Borg-Warner Security Corp. 255 146,000 (Wells Fargo) Ameritech (Security Link/National 250 344,000 Guardian) Honeywell Inc. 223 190,000 Westinghouse Security Systems 150 376,000 (Westar) Brink's Home Security 128 378,700 Rollins Protective Services 66 120,000 Westec Security 62 62,000 Protection One 56 141,000 Republic Industries 53 150,000 Source: Security Distributing & Marketing, May 1996. - ---------- * Worldwide - (excludes the acquisition of Alert Centre and Automated Security) Overview of ADT's Electronic Security Services Business Key Performance Metrics Installation revenues Installation cost Selling, marketing and administration Recurring revenues - monitoring and maintenance services Overview of ADT's Electronic Security Services Business Electronic Security Services - net Sales (Worldwide)(*) GRAPHICS BAR CHART NET SALES ($MM) 1991 $ 880.9 1992 $ 901.1 1993 $ 937.3 1994 $ 999.8 1995 $1,092.5 9 months 1996 $1,038.8 Total Number of Customers ('000's): 1991 647 1992 744 1993 864 1994 1,019 1995 1,214 9 months 1996 1,700+ - ----------- (*) Amounts for 1995 and prior years exclude the acquisition of Alert Centre and Automated Security Overview of ADT's Electronic Security Services Business Contractually Recurring Revenues (Worldwide) GRAPHICS BAR CHART RECURRING REVENUES $MM 1992 - $ 518 1993 - $ 553 1994 - $ 558 1995 - $ 658 LTM Sept. 1996 (*) - $ 885 - --------- (*) Reflects acquisitions of Alert Centre and Automated Security Overview of ADT's Electronic Security Services Business Residential Security System Unit Sales GRAPHIC: Arrow Illustrating 36.8% Compound Annual Growth Rate BAR CHART 1989 - 29,000 1990 - 50,000 1991 - 80,000 1992 - 115,000 1993 - 145,000 1994 - 180,000 1995 - 215,000 1996E(*) - 260,000 - --------- (*) Reflects acquisition of Alert Centre and Automated Security Overview of ADT's Electronic Security Service Business Electronic Security Services - Operating Income (Worldwide)(*) GRAPHIC BAR CHART OPERATING INCOME ($MM) 1991 - $127.7 1992 - $141.0 1993 - $154.0 1994 - $172.9 1995 - $188.7 9 months 1996 - $159.1 - --------- (*) Excludes goodwill amortization, restructuring charges, and FAS 121 charge. Amounts for 1995 and prior years exclude the acquisitions of Alert Centre and Automated Security Overview of ADT's Electronic Security Service Business Nationwide Service and Distribution Network GRAPHICS MAP OF THE 48 CONTIGUOUS UNITED STATES AND CERTAIN CANADIAN PROVINCES ILLUSTRATING SERVICE AND DISTRIBUTION NETWORK LOCATIONS. 19 Customer monitoring centers 179 Sales and services offices Overview of ADT's Electronic Security Service Business European Service and Distribution Network GRAPHICS MAP OF THE EUROPEAN CONTINENT ILLUSTRATING SERVICE AND DISTRIBUTION NETWORK LOCATIONS. 10 Customer monitoring centers 34 Sales and services offices Overview of ADT's Electronic Security Service Business Key Sources of Operating Efficiencies Customer monitoring center consolidation National service and sales network Reorganization to focus on key markets and customers along functional lines of business: - Customer service - Residential sales and installation - Commercial national account sales and installation - Dealer development and acquisitions Initiatives For Future Growth Initiatives For Future Growth The Competitive Landscape Offers Opportunities To Grow Internally And Through Acquisitions GRAPHIC CHART 1995 SALES ($ IN MILLIONS) ILLUSTRATING CUSTOMER PROFILES SERVING: % Residential 1995 Sales Company Customers 1995 (in Millions) ADT(*) 25 1092.5 Borg Warner 5 255 Ameritech 20 230 Honeywell 30 223 Brinks 95 128 Westinghouse 95 150 (Westar) Rollins 82 66 Westec 82 62 Protection 95 56 One Republic 70 53 Source: Security Distributing & Marketing (May 1996 and May 1996) - ----------- * 1995 Sales figures excludes the acquisition of Alert Centre and Automated Security Initiatives for Future Growth Overview of Internal Growth Opportunities Residential market - Size of the market: $4.7+ billion(*) - Less than 10% of 98 million homes served - Increasing demand for new security services - Lower price points Commercial market - Size of the market: $5.6+ billion* - Strong penetration in large companies: 438 of the Fortune 500 - Opportunities to increase market share in small companies Significant operating leverage - Significant monitoring capacity available - All major infrastructure expenditures completed Customer retention - Service excellence - Frequency of interaction with customers - ------------- (*) 1994 figure based on STAT Resources. Initiatives for Future Growth Strategy for Residential Electronic Security Business Leverage strong brand - Established 1874 - National TV advertising campaign - targeted households - "Security for Life" New channels of distribution - Strategic alliances - Expansion of authorized dealer program - Build account density to improve efficiency New security services - Security beyond the boundary of the home - Integration of technologies to create new services and competitive advantages Initiatives for Future Growth Strategy for Commercial Electronic Security Business Targeting key security sensitive industries: banks, retailing, manufacturing, universities. Emphasis on increasing penetration in small businesses - Established toll free small business hotline. - Partnership with Philips N.A. to produce closed circuit TV for small businesses. ADT as "management consultant" - Moving from direct sales force to client-specific solution oriented team. - Security "partnership" with customers. Regulatory and insurance issues present opportunities for growth. Initiatives for Future Growth New Directions in Customer Service Emphasis on increasing interaction with customers to better understand needs and expectations in industry that has traditionally been activity adverse. Implementation of team concept in customer service. Dedication to training, including technical certification for employees to improve the quality of customer service. Vendor input in R&D spending decisions to produce more user-friendly products. New Technologies Increasing use of technology to provide security solutions - Ensec - Oracle - MCI Systemhouse - Internet Widespread use of technology will reduce the cost of services to end users and allow ADT to service customers over a wider geographic area from a central monitoring station. Initiatives for Future Growth Expanding Distribution Channels Expansion of Authorized Dealer Program - From 58 at beginning of 1996 to 120 in 20 states by year end 1996. New strategic alliances to broaden distribution channels and increase access to residential market. - Radio Shack - ADT systems now available in 4,500 retail stores. - USAA Insurance - 3 million members have the opportunity to lower their premiums through ADT / USAA Home Security Program. - HFS / Century 21 - ADT home security services now offered through national network of 10,000 Century 21 and ERA real estate offices. Initiatives for Future Growth New Security Services: CarCop Revolutionary concept in personal protection and vehicle security, ready for national roll out in 1997. Centrally monitored vehicle tracking, location and security system. Effective integration of three significant technological infrastructures - Cellular Communications - Global Positioning Satellite System (GPS) - Monitoring by ADT, 24 hours a day Only system that offers protection for both the car and the passengers inside. Initiatives For Future Growth Summary of Recent Acquisitions Alert Centre, Inc. - Transaction Value: $119 million - Provides services to 131,000 residential customers in the Southeast - Tenth largest provider of electronic security services in the U.S. - 1994 revenues of approximately $57.5 million. Automated Security (Holdings) PLC - Transaction Value: $376 million - Provides 229,000 new accounts to customer base - Leading provider of electronic security services in the UK - Subsidiary (API Security) is largest security provider in California - 8th largest in U.S. - LTM Revenues of approximately $255.9 million Initiatives for Future Growth Recent and Pending Divestitures U.K. Auto Auction Business - completed 4th quarter 1995 - Transaction value: $334 million; U.S. Auto Auction Business - planned for 1st half 1997 - 9 months 1996 Net Sales: $222.8 million - 9 months 1996 Operating Income: $33.4 million(*) Rationale Redeployment of capital from slower growing auction businesses into faster growing security operations, principally in the U.S., will increase overall growth rate. Divestiture of auction business will result in ADT emerging as a "pure play" electronic security firm, which in turn should increase its P/E multiple. - ----------- (*) Excludes FAS 121 charge. Initiatives for Future Growth Objectives of Future Acquisitions Achieve and enhance economies of scale: - Increase market share in regions where ADT currently operates - Expand in contiguous geographic areas - Increase volume at existing central monitoring stations - Enhance brand equity - Develop incremental customer awareness Expand operating margin by elimination of redundant operating expenses. Gain "first mover" advantage in consolidating a fragmented industry: - The market expects ADT to lead this trend Maintain favorable relative valuation among peer group: - Stimulate growth rate of cash flow and earnings - Increase market multiples (e.g., P/E, Mkt Cap/EBITDA) Initiatives for Future Growth Criteria for Prospective Acquisitions Business Criteria Size and Scope of Operations Comparable lines of business Geographic overlap to achieve economies of scale Strategic Position Complementary market share in existing geographic areas Strong reputation for quality service Transaction Financial Impact Criteria Accretive to EPS Synergies material and attainable Structure to minimize deterioration in financial flexibility Structure to maximize ability to invest capital Market Reaction Favorable if clear understanding of strategic rationale and earnings impact Appendix Why Shareholders Should Vote Against Western Resources' Proposals -- Shareholders Should Maintain a Board that is Independent from Western -- Western's Effort to Elect its Senior Officers to Run ADT is Coercive and Premature -- Board's Preliminary View is that Western's Offer is Inadequate -- Western is not a Strong Strategic Partner for ADT -- Western's "Business Opportunities" Argument is Unsupported -- Western Is a Heavily Regulated Utility -- Western has Failed to Address How it will Re-Finance ADT's Borrowings and Ongoing Business Growth -- Western has not Addressed how it will Manage ADT's Business [More text to follow] CERTAIN ADDITIONAL INFORMATION: ADT Limited (the "Company") will be soliciting proxies against the proposals of Western Resources, Inc. (together with its subsidiaries, "Western") and revocations of proxies previously given to Western for such proposals. The following individuals may be deemed to be participants in the solicitation of proxies and revocations of proxies by the Company: ADT Limited, Michael A. Ashcroft, John E. Danneberg, Alan B. Henderson, James S. Pasman, Jr., Stephen J. Ruzika, W. Peter Slusser, William W. Stinson, Raymond S. Troubh and Angela E. Entwistle. As of January 7, 1997, Mr. Ashcroft is the beneficial owner of 11,075,718 of the Company's common shares, Mr. Danneberg is the beneficial owner of 102 of the Company's common shares, Mr. Henderson is the beneficial owner of 621 of the Company's common shares, Mr. Pasman is the beneficial owner of 2,000 of the Company's common shares, Mr. Ruzika is the beneficial owner of 1,157,405 of the Company's common shares, Mr. Slusser is the beneficial owner of 2,800 of the Company's common shares, Mr. Stinson is the beneficial owner of 3,010 of the Company's common shares, Mr. Troubh is the beneficial owner of 2,500 of the Company's common shares and Ms. Entwistle is the beneficial owner of none of the Company's common shares. -----END PRIVACY-ENHANCED MESSAGE-----