Tyco Jumps Back Into the Deal Fray

Kraft (KFT) is stealing the M&A spotlight, but Tyco International (TYC) is making its own bid for attention today after agreeing to acquire Brink’s Home Security (CFL). Brink’s — now operating as Broadview Security — surged more than 30% on the news.

The Journal notes that it’s Tyco’s first major deal since the company was split apart eight years ago.

Tyco already dominates the residential security market through its ADT unit. Brink’s is the second largest player. Tyco plans to combine the units under the ADT name.

The $2 billion deal is a mix of cash and stock and values Brink’s at $42.50 per share. The boards of both companies have already signed off on the merger, and Tyco says the deal will add seven cents to earnings in the first full year. In a separate announcement, Tyco boosted its first-quarter guidance.

Brink’s shares are up $9.91, or 32%, today to $41.33. Tyco is up 26 cents to $37.80.

Analysts are largely positive on the deal:

• Nigel Coe at Deutsche Bank reiterated his Buy rating on Tyco shares: “Strategically this plays directly into Tyco’s wheel-house, increasing its U.S. residential and small-business account base from 4.8 million to 6.1 million but the resultant four to five percetange point increase in market share to ~20% means that anti-trust concerns are likely to be modest, despite Brink’s being the only other scale player in the market.”
• Standard & Poor’s Equity Research kept a Hold: “We think Tyco’s business is in early recovery stage, and Brink’s should solidly expand its domestic home security business,” analyst Michael Jaffe wrote. He raised his price target by $4 to $40.
• Goldman Sachs analyst Terry Darling likes the “clear operational and tax synergies in a business that extends the company�s leadership position.”� He adds that “Tyco is retaining strong balance sheet optionality for additional M&A or buy-back.”