UPDATE 4-Apollo Global braves LBO rout with $7 bln ADT deal

Tue Feb 16, 2016 6:36pm EST
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* Deal biggest leveraged buyout so far this year

* $7 bln cash deal Apollo's second this month

* ADT to merge with Protection 1 after deal closes (Adds background on the financing, analyst comment, industry background)

By Koh Gui Qing and Greg Roumeliotis

Feb 16 (Reuters) - Private equity firm Apollo Global Management LLC said on Tuesday it had agreed to buy U.S. security company ADT Corp in the biggest leveraged buyout (LBO) of the year thus far, defying a challenging financing market for such deals.

LBOs have been few and far between so far this year as banks have been reluctant to finance deals, fearing they would not be able to sell on the debt due to the market volatility. Apollo tested its relationships with its lenders, tapped new investors, and used a portfolio company to put together the deal with ADT.

Apollo said it would pay $42 in cash for every ADT share, valuing its equity at close to $7 billion, a 56 percent premium over Friday's closing price. It will merge the company with Protection 1, a smaller U.S. peer it acquired last year. The combined company will be valued at $15 billion, including debt, Apollo said.

While Apollo and its co-investors agreed to provide $4.5 billion for the deal - a big equity check by LBO industry standards - the majority of the deal will be funded with bank debt and other financing.

By comparison, when Apollo agreed to acquire the previously unaffiliated for-profit education provider Apollo Education Group Inc earlier this month for $1.1 billion, the New York-based firm and its co-investors agreed to fund the deal entirely by themselves, without bank debt.   Continued...