BALTIMORE--(BUSINESS WIRE)--The announced buyout of home security company ADT (ADT) by Apollo Global Management (APO) is reminiscent of the 2008 buyout of casino giant Caesars, according to a new report by UNITE HERE Gaming Research. Caesars filed for Chapter 11 bankruptcy in January 2014 and the proceedings have no end in sight. The ADT deal threatens to be a repeat of “Apollo’s failure to guide Caesars through a changing market,” the report warns.
The new report, titled Apollo & ADT: Will ADT become the next Caesars? highlights the rapidly changing home security market and the parallels to changes the gaming industry underwent in the years following the Caesars buyout.
“If the Caesars LBO saddled a healthy company with too much debt during a time when the competitive landscape was changing, then the ADT LBO may end up being a repeat of that debacle,” the report says.
The report finds that:
- Apollo and others acquired Caesars in 2008 as the gaming industry experienced dramatic change and new competition. Apollo took Caesars into Chapter 11 in 2015.
- A court-appointed examiner found that aiding and abetting breach of fiduciary duty claims of varying strength exist against the Sponsors [Apollo and TPG] and certain of CEC’s directors relating to Caesars asset transfers that the examiner concluded were to the detriment of creditors.
- The home security market is experiencing a wave of new competitors and products, from large telecoms to start-up DIY providers.
- The ADT deal could be a repeat of Apollo’s failure to guide Caesars through a changing market.
Key figures from the report include:
- Telecoms and cable companies grew their home security customer base over 100% between 2014 and 2015, compared to ADT’s 6% growth in gross additions between their FY 2014 and 2015.
- The new company will be saddled with 81% more debt.
- Comcast alone has a total subscriber base four times the size of ADT’s.
About UNITE HERE Gaming Research:
The UNITE HERE Gaming Research Department regularly distributes information about investment managers in our members’ industries. We provide analysis and commentary on the gaming industry from the perspective of those who work in it. Nationally, UNITE HERE represents 100,000 casino workers making us the largest casino workers' union in the world.