-----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, G556S0xUneJ+df5LntsKCKzawBsjNPFBeRJLmcUAzmlHzDRXtSRFkBV9PdvVH1mq YN15G7TsPqL2jdgP3e7FqQ== 0000950103-97-000145.txt : 19970305 0000950103-97-000145.hdr.sgml : 19970305 ACCESSION NUMBER: 0000950103-97-000145 CONFORMED SUBMISSION TYPE: DEFA14A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19970304 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: 97549902 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 Forward Looking Information Certain statements in this presentation constitute "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, statements contained herein regarding the consummation and benefits of future acquisitions, as well as expectations with respect to future sales, operating efficiencies and product expansion are subject to known and unknown risks, uncertainties and contingencies, many of which are beyond the control of ADT, which may cause actual results, performance or achievements to differ materially from anticipated results, performance or achievements. Factors that might affect such forward looking statements include, among others, overall economic and business conditions, the demand for ADT's services, competitive factors in the industry, regulatory approvals and uncertainty about the consummation of future acquisitions. 1. Overview [Graphic - Check Marked Box] ADT "Status Quo" is a Vote For More Value bullet Superior Stock Price Performance: #1 Electronic Security Services company is a solid growth vehicle (Lehman research target: $28-$30 by year end 1997) bullet Basic Growth Engine: 1.8 million customer installed base ($920 million in contractual recurring revenues) bullet ADT's Turbocharger: next generation "data management" technology offerings being delivered today 1. Overview [Graphic - Empty Box] Western Proposal is Not Worthy of Your Vote bullet Stated Value: $22.50 is inadequate bullet Theoretical Value: $10.00 + 0.42017 WR shares is likely to be less than $22.50 bullet Realizable Value: with ADT, KCP&L and "dividend nervous" sellers, market indigestion means realizable values may be much less than $22.50 bullet Taxable transaction 1. Executive Summary ADT Present bullet ADT is the Strong #1: electronic security services -- North America and U.K. bullet Earnings Quality: recurring revenues - $920 million (1.8 million customers, 65% is contractual) bullet ADT has become a "Pure Play" Electronic Security Services Provider: Selling/Sold: U.S. and U.K. Vehicle Auction operations Acquired: Alert Centre, ASH (synergies from these recent deals still to come) 1. Executive Summary ADT Future bullet Well-Positioned for the Future of the Electronic Security Services Industry: bullet Leading market position bullet Only player with national brand and service delivery bullet Economics of scale bullet Next generation "service provider" products (the turbocharger for ADT's current growth engine) bullet Consolidator in a fragmented industry 2. Forces Shaping The Electronic Security Services Industry Industry Trends bullet Fragmented Industry Where ADT is the leader -Top 100 companies - 23% market share -Total market $13 billion in 1996* -ADT is about 3.5 times the #2 player bullet Key Drivers for Future (Residential) Industry Growth -Size of potential market (98 million homes) -Low residential market penetration (currently 10%) -Increased crime awareness -Next generation security products (technology "upgrades") bullet "Higher Technology" Further Benefits ADT -More sophisticated equipment -More sophisticated monitoring -More sophisticated service needs -ADT is the clear leader * Source: STAT Resources 2. Forces Shaping The Electronic Security Services Industry Fragmentation Persists Despite Recent Consolidation [Graphic-Chart depicting the following ($ in millions)] U.S. Electronic Security Industry: 1995 Revenue and Market Share Comparison $880 ADT/Alert Pro Forma $255 Borg-Warner (Wells Fargo) $250 Ameritech* $223 Honeywell $150 Westinghouse Security (Westar) $128 Brink's Home Security $66 Rollins Protective Services $62 Westec Security $56 Protection One $53 Republic Industries Source: Security Distributing & Marketing, May 1996. * Includes the acquired businesses of National Guardian and Security Link. 3. Overview of ADT's Electronic Security Services Business Electronic Security Services - Net Sales (Worldwide)* [Graphic - Chart depicting the following Net Sales ($MM)] 1992 $901.1 1993 $937.3 1994 $999.8 1995 $1,092.5 1996 $1,406.2 Total Number of Customers ('000's): 744 1992 864 1993 1,019 1994 1,214 1995 1,800 1996 * Amounts for 1995 and prior years exclude the acquisitions of Alert Centre and Automated Security. 3. Overview of ADT's Electronic Security Services Business Contractually Recurring Revenues (Worldwide) [Graphic - Forward/upward pointing arrow reads: 15.4% Compound Annual Growth Rate] [Graphic - Chart depicting the following (Recurring Revenues $mm)] 1992 $518 1993 $553 1994 $588 1995 $658 1996* $920 * Reflects acquisitions of Alert Centre and Automated Security 3. Overview of ADT's Electronic Security Services Business Residential Security System Unit Sales [Graphic - forward/upward pointing arrow 36.5% Compound Annual Growth Rate] [Graphic - Chart depicting the following] 1989 29,000 1990 50,000 1991 80,000 1992 115,000 1993 145,000 1994 180,000 1995 215,000 1996 280,000 1997P 350,000 3. Overview of ADT's Electronic Security Services Business Electronic Security Services - Operating Income (Worldwide)* [Graphic - Chart depicting Operating Income ($MM)] 1991 $127.7 1992 $141.0 1993 $154.0 1994 $172.9 1995 $188.7 1996 $223.1 *Excludes goodwill amortization, restructuring charges and FAS 121 charge. Amounts for 1995 and prior years exclude Alert Centre and Automated Security. 3. Overview of ADT's Electronic Security Services Business Nationwide Service and Distribution Network North America [Graphic - Map of the forty-eight contiguous United States and Canada illustrating service and distribution network] 19 Customer monitoring centers 200 Sales and service offices U.K. [Graphic - Map of the United Kingdom and Ireland illustrating service and distribution network] 5 Customer monitoring centers 29 Sales and service offices 4. Initiatives For Future Growth Overview of Internal Growth Opportunities [Graphic - ADT logo in the middle with the following pointing to ADT] Residential Business Initiatives Commercial Business Initiatives Customer Service Initiatives New Technology Initiatives 4. Initiatives For Future Growth Residential Business bullet Leverage Strong Brand ("Security for Life") bullet New Channels of Distribution bullet Strategic Alliances (AT&T, Radio Shack, USAA, HFS (ERA/Century 21)), More to Come! bullet Dealers (January 1996 - 58 dealers) (Year End 1996 - 120 dealers) bullet Account Density Targeting bullet New Security Services (not just the home) bullet CarCop (GPS vehicle tracking) bullet Video Security bullet Medical Monitoring bullet Personal Security 4. Initiatives For Future Growth Commercial Business bullet Integrated systems provider (national accounts) bullet Retrofits for current large, sophisticated customers (390 of the Fortune 500) bullet "Security Sensitive" businesses need new products (banks, retail, manufacturing, public sector) bullet Work place data management bullet Remote site monitoring bullet Employee monitoring bullet Customer traffic flow bullet Increased penetration for small businesses (new CCTV products) bullet ADT designs system solutions (client-specific marketing) 4. Initiatives For Future Growth Customer Service Initiatives bullet "Customer Care" Programs - putting more distance between ADT and its competitors bullet More customer interaction bullet Team concept bullet Employees get superior technical training bullet R&D Spending bullet New products shaped by vendor inputs 4. Initiatives For Future Growth New Technology Initiatives bullet Expanding our hardware and software capabilities bullet Oracle bullet MCI Systemhouse bullet Digital bullet Hewlett Packard bullet Ensec bullet Customer monitoring center station becomes a "data management center" 5. Why Shareholders Should Vote Against Western Resources' Proposals This Kansas "Fairy Tale" Doesn't Have a Happy Ending Toto Isn't The Only Dog in Kansas [Graphic - Toto] Realizable value of Western's bid may be nowhere near $22.50 (at 25% of current WR volume, it takes ADT holders more than 5 years to exit stock -- or 35 dog years) Western Adds Nothing [Graphic - Dorothy's ruby slippers] ADT already safeguards Dorothy's ruby slippers (security for the Smithsonian Institute) This "Twister" Means Downside For ADT Shareholders [Graphic - a twister (tornado)] Western earnings and free cash flow spiral downward with each subsequent dilutive deal (ADT would be the biggest drop yet) There Are No Wizards Behind This Curtain [Graphic - Picture of hanging curtains] Western lacks the management depth to handle 4 large, simultaneous deals With Apologies to "The Wizard of Oz" 5. Why Shareholders Should Vote Against Western Resources' Proposals Western's Pro Forma Stock Price [CAPTION] Pre-ADT - Core Earnings Questions [GRAPHIC -- A TWISTER] Pre-ADT - Cash Flow "Crunch" - --------------------------------------------------- ----------------------------------------------------- bullet Hidden dilution from recent deals bullet Cash Crunch: ADT, Westinghouse, foreign (e.g., Westinghouse) investments = $1.15 billion spent in 12 month period = 8.4 years of WR dividends bullet Threat of deregulation (WR has high-cost generating assets; neighbors are large, bullet Post KCP&L - free cash flow is nearly $190 well-capitalized and long power) million short of required dividends bullet Energy services capabilities = LIMITED bullet "In the absence of significant additional equity issuances, the company's financial bullet KCP&L: even targeted net synergies can't condition will erode" relieve dividend pressure bullet Insufficient management talent to successfully integrate: bullet Westinghouse bullet KCP&L bullet Foreign Investments Post-ADT - Cash Flow "Crisis" Post-ADT - Further Earnings Hit - -------------------------------------------------- ----------------------------------------------------- bullet Dividend pressure bullet 26-32% dilutive to post KCP&L E.P.S. in first few years bullet WR risks a non-investment grade rating New Shareholders (ADT, KCP&L) and existing bullet Net negative synergies "dividend nervous" shareholders create WR "selling stampede" bullet Not enough management talent to do four (4) deals at once Next WR Bid (?) ----------------------------------------------------- bullet More cash and/or more shares mean more downward pressure on WR stock bullet Key Issue: Given this outlook, can Western even afford a "fair price"? 1. Standard & Poors Creditwire December 19, 1996
5. Why Shareholders Should Vote Against Western Resources' Proposals Western is Hardly the Ideal Partner Issues in Western's Core Businesses [CAPTION] bullet Small Size: bullet No Energy Service Franchise Volume (Mwh) - -------------------------------------------------- ------------------------------------------------------ --------------- Top 5 Power Marketers --------------------- pro forma for KCP&L, a $4 billion utility (23rd Enron Power Marketing 60.5 largest in U.S.); top 6 utilities are $8 billion+ Duke/Louis Dreyfus/PanEnergy Power 32.5 LG&E Power Marketing 17.1 Electric Clearinghouse 14.9 Citizens Lehman 12.1 Western (?) N.M. bullet Deregulation: bullet Westinghouse Security Net Income Dilution: - ------------------------------------------------------- ----------------------------------------------------- High Cost Generating Assets: more than 60% of $12-15 million per annum ---------------------------------------------------- (9 Cents - 12 Cents per WR/KCP&L share) WR/KCP&L assets are generation Western/KCP&L (Blended Average Rates) bullet "Scatter Shot" Corporate Focus ----------------------------------------------------- ---------------------------------------------------------- Resid. Rate 7.87 Cents Comm. Rate 6.71 Cents bullet Oneok Ind. Rate 4.69 Cents bullet Westinghouse Security bullet Foreign Investments bullet KCP&L bullet ADT(?) Where is the seasoned, highly-skilled management team that can integrate all these deals simultaneously? ---------------------------------------------------------- bullet 5 Biggest Threats to WR/KCP&L Grid - ------------------------------------------------------------- Marginal Cost Reserve Margin ------------- -------------- bullet Central & Southwest 2.32 Cents 15% bullet Entergy 3.24 8% bullet SW Public Service 2.04 5% bullet Texas Utilities 2.56 19% bullet Union Electric 1.93 9% ---- --- Average: 2.42 11%
5. Why Shareholders Should Vote Against Western Resources' Proposals Western is Hardly the Ideal Partner Problems with the Inadequate Offer for ADT bullet Massively Dilutive to Pro Forma E.P.S. 26%-32% in the first two years bullet Credit Rating Western is out of debt capacity, pro forma for ADT could be at least a two notch downgrade bullet Pro Forma Liquidity is but a Trickle at 25% of current WR volume, it would take ADT shareholders more than 5 years to fully exit their WR stock bullet Dividend Pressure 1998 Pro Forma Payout Ratio 117%(*) 1998 Pro Forma Free Cash Flow Ratio 222%(0) Note: The next price increase by Western would only exacerbate this problem bullet Net Negative Synergies Sum of the after-tax savings that ADT could realize on Westar/Westinghouse does not even pay for the loss of ADT's international tax structure. 5. Why Shareholders Should Vote Against Western Resources' Proposals Western Pro Forma for ADT is Massively Dilutive 1997 1998 ---- ---- bullet Summary Dilution Analysis: Western Resources E.P.S. - Pre KCP&L, Pre ADT $2.52 $2.74 Western E.P.S. - KPC&L Pro Forma $2.26 $2.47 Western Pro Forma for KPC&L, ADT (40 year) $1.79 $2.10 (% Dilution from WR - KCP&L) (20.8%) (15.3%) bullet Incremental Dilution from: Onshore Structure (10 Cents) (10 Cents) 24 Year Intangible Amortization (17 Cents) (17 Cents) Adjusted Western Pro Forma E.P.S. $1.52 $1.83 (% Dilution from WR - KCP&L) (32.4%) (26.1%) - ---------- (*) ADT Estimate bullet Market Confusion Regarding Potential Dilution: The Wall Street research community is having difficulty quantifying the pro forma impact of Western Resources' proposed acquisition of ADT. In an October 1996 report, a leading securities firm research analyst calculated that an acquisition of ADT at $23.00 per share would be $0.05 per share accretive to Western. Two months later, the same analyst estimated Western's $22.50 per share proposal would result in dilution of $0.35 - $0.40 per share to Western. bullet Intangible Amortization: The potential dilution may be significantly worse than Western has indicated because separate identifiable intangibles are amortizable over their estimated useful life, not 40 years (incremental dilution could be 17 Cents per share, assuming a blended 24 year amortization period) and moving ADT onshore costs another 10 Cents per pro forma share. 5. Why Shareholders Should Vote Against Western Resources' Proposals How Much Are 0.42017 Shares Really Worth? [Graphic - This information is set out as boxed text] The "Offer" $10.00 in Cash 0.42017 shares BLENDED ADT-WR-KCP&L PE 1997E Net 1997E Net Income as AT 12/17/96 1997E PE Income (1) % of Total - ----------- -------- ---------- ---------- ADT 17.1x $210 41% (KCP&L)(2) 13.7x 127 25% WR 11.7x 174 34% Blended PE 14.4x $510 100% [Graphic - Table] 1998 Pro Forma(3) - ----------------- WR (Pro Forma for ADT, KCP&L) - ---------- (1) No adjustment made for anticipated premium to be paid to KCP&L. (2) Based on Wall Street consensus estimates. (3) Pro forma analysis based upon Wall Street estimates for ADT and for WR/KCP&L pro forma for their transaction. E.P.S - ----- $1.83 Estimated Blended PE Multiple - ----------------------------- 14x - 16x Theoretical WR Price Range at 1/1/98 - ------------------------------------ $25.62-$29.28 Theoretical Value of 0.42017 Shares - ----------------------------------- $10.76-$12.30 Per Share Cash Component - ------------------------ $10.00 Total Value for ADT Shares (at 1/1/98) - -------------------------------------- $20.76-$22.30 Discounted to - ------------------------------- 2/28/97 at 15%: $18.48-$19.85 5. Why Shareholders Should Vote Against Western Resources' Proposals The Reality Check bullet Point of Departure bullet Why give control of the ADT Board to a "Low - Ball Bidder"? bullet Why pursue a merger of equals with a small, over-leveraged Kansas utility with net negative synergies and severe dilution to ADT's "pure play" growth rate? bullet Who is more closely aligned with ADT shareholders in creating shareholder value? bullet Michael Ashcroft - 11,075,718 ADT shares beneficially owned (7.8% of outstanding) bullet Steve Ruzika - 1,157,405 ADT shares beneficially owned (0.8% of outstanding) bullet John Hayes - 20,849 Western shares beneficially owned (0.1% of outstanding) bullet David Wittig - 16,634 Western shares beneficially owned (0.0% of outstanding) bullet Bottom Line bullet ADT's Future is Bright (stock should exceed stated value of bid by mid-year 1997) bullet Western's Future is Bleak (pre-tax realizable value of Western offer unlikely to exceed $22.00 per ADT share by year end 1997) Three Year Relative Stock Price performance [Graphic - chart depicting the following: three year relative stock price performance among ADT, the S&P 400, the S&P Utilities and Western Resources, for the period February 28, 1994 through February 28, 1997.] 2/28/94 2/28/97 ------- ------- ADT 100% 214.81% S&P 400 100% 169.00% S&P Utilities 100% 120.92% WR 100% 99.18% 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 February 24, 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 29,500 of the Company's common shares. The Company has retained Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") to act as its financial advisor in connection with Western's proposals. Merrill Lynch is an investment banking firm that provides a full range of financial services for institutional and individual clients. Merrill Lynch does not admit that it or any of its directors, officers or employees is a "participant" as defined in Schedule 14A ("Schedule 14A") promulgated under the Securities Exchange Act of 1934, as amended, in the proxy solicitation, or that such Schedule 14A requires the disclosure of certain financial information concerning Merrill Lynch. In connection with Merrill Lynch's role as financial advisor to the Company, Merrill Lynch and the following investment banking employees of Merrill Lynch may communicate in person, by telephone or otherwise with a limited number of institutions, brokers or other persons who are shareholders of the Company: Barry Friedberg (Executive Vice President), Richard Johnson (Managing Director), Huston McCollough (Managing Director), Hugh O'Hare (Vice President), Robert Simensky (Vice President) and Paul Bastone (Associate). In the normal course of its business, Merrill Lynch regularly buys and sells securities issued by the company and its affiliates ("ADT Securities") for its own account and for the accounts of its customers, which transactions may result from time to time in Merrill Lynch and its associates having a net "long" or net "short" position in ADT Securities or option contracts with other derivatives in or relating to ADT Securities. As of February 28, 1997, Merrill Lynch held positions in ADT Securities as principal as follows: (i) net "short" 769,995 of the Company's common shares; (ii) net "long" $51,000 par amount of 9.25% Guaranteed Senior Subordinated Notes of the Company due August 1, 2003; and (iii) net "long" 31,509 Liquid Yield Option[Trademark] Notes of the Company due 2010, exchangeable for 889,499 of the Company's common shares. -----END PRIVACY-ENHANCED MESSAGE-----