Tyco board votes to spin off ADT, its best brand

The ADT security system home page details what the system offers, such as medical alert, burglar alarm and others.
The ADT security system home page details what the system offers, such as medical alert, burglar alarm and others.
Posted: September 19, 2012

Tyco International Inc., the global conglomerate based in tax-friendly Switzerland but operated by a group of Philadelphia-area executives from offices near Trenton, is breaking up again.

The company's shareholders voted Monday to approve chief executive Edward Breen's plan to spin off its best-known consumer brand, the ADT home and small-business alarm service, into a separate company, ADT Corp. The stock will start trading on the New York Stock Exchange on Oct. 1.

ADT hopes to use what Naren K. Gursahaney, who has run the unit since 2007, calls the "cool factor" of home automation - new systems using smartphones and other remote devices to link to home video and temperature sensors, check security networks, connect to local law enforcement, and turn on lights, appliances and utilities.

ADT already has a network of 200 local alarm service centers, six million customers and 16,000 workers, and is looking to boost the proportion of Americans who pay for home security.

"The ability to participate in your family or monitor your family or your business from wherever you are, that's the kind of culture we're in right now," Gursahaney said. "People want to be connected, whether it's their homes or businesses."

Besides spinning off ADT, Tyco also plans to merge a group of its pipe- and pump-making units with a separate company, Pentair Inc., into a new firm, Tyco Flow Control International Inc. Tyco hopes investors will pay higher prices for shares of the independent, focused companies - as well as its remaining manufacturing industries.

That has been the gameplan, mostly, since 2006, when Breen split off Berwyn-based TE Connectivity, which makes electrical equipment, and medical-supplier Covidien.

About 25 million North Americans - less than one in five households - already pay for an elecronic security system, and ADT is the leading provider with about a quarter of the market, according to data the company submitted to the Securities and Exchange Commission.

Despite increased concern about security since 9/11, "that's where our industry has been for quite a while," Gursahaney said in an interview. As an independent company, ADT will focus on "moving north of that 20 percent."

He's not the only one who sees opportunity. Comcast and Verizon, among other telecom providers, have stepped up efforts to pitch home security and automation systems to their video and phone customers. Breen stepped down from Comcast's board of directors last year, partly to avoid a conflict of interest with his duties regarding ADT.

"It's a great validation for home security, that Tyco is spinning out ADT, and that Comcast and AT&T are beginning to bundle things like home security," said Michael Hagan, chief executive of Yardley-based LifeShield, a venture capital-backed home security company. "Big-brand advertising will show it's more than the ugly old panel on the wall. It's about a connected home, with videos sent to your iPhone when your kids come back from school, with home health-care services, all on top of the core of fire and police dispatch, and driving the cost down to a sub-$30 a month service."

By "leveraging" information-technology-based services to its phone and video customers, Comcast can show investors it is worth a higher share price than its vast video businesses would command on their own, analyst Tony Wible, of Philadelphia-based Janney Capital Markets, told clients in a report last week.

Acknowledging competition from the phone, Internet and cable-TV industries, each of which counts a large majority of American homes as clients, ADT is counting on its history of focusing on protection as its central service.

"For us, the foundation is still the security system, and it's a very intimate sale: 90 percent is done across the kitchen table," instead of from call centers, Gursahaney said. "It's a very consultative selling process that involves a lot of listening."

Under Tyco, ADT operated from an office in Boca Raton, Fla., and that's where Gursahaney is locating the new corporate headquarters, plus a new research lab.

For his new corporate staff, Gursahaney is moving south a group of Philadelphia-area Tyco executives, including David Bleisch, who will serve as general counsel, and human resources chief Anita Graham, among others.

The new ADT board of directors also includes Philadelphia-area residents, such as former Bell Atlantic and NAACP executive Bruce Gordon and Merck consumer products chief Bridgette P. Heller.

Contact Joseph N. DiStefano at 215-854-5194, JoeD@phillynews.com, or on Twitter @PhillyJoeD.

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