State Farm Mutual Automobile Insurance Co., the largest US home insurer, agreed to make a $1.2 billion equity investment in ADT Inc., giving it a 15% stake in the security-services provider.
(Bloomberg) — State Farm Mutual Automobile Insurance Co., the largest US home insurer, agreed to make a $1.2 billion equity investment in ADT Inc., giving it a 15% stake in the security-services provider.
State Farm will acquire 133.3 million shares of ADT’s common stock at $9 per share, or 25% higher than Friday’s closing price, according to a statement Tuesday.
ADT will commence a self-tender offer for an equal number of its outstanding common and Class B stock at the same price, eliminating any dilution from State Farm’s investment, according to the statement. Funds managed by affiliates of Apollo Global Management Inc., ADT’s majority owner, are ensuring the offering is fully subscribed. Shares of ADT surged 11% to $8.02 at 9:41 a.m. in New York trading.
The partnership is the latest example of insurers pairing up with technology and security firms to get more granular insight into home security. Travelers Cos. announced a partnership with Amazon.com Inc. to offer customers discounts on security cameras, water sensors and motion detectors, and insurance-technology firm Hippo Holdings Inc. has sought to position itself as a one-stop shop for homeowners looking to protect and maintain their homes.
ADT, based in Boca Raton, Florida, and State Farm also will work with Alphabet Inc.’s Google on next-generation security, smart-home technology and risk-mitigation capabilities to detect and prevent homeownership risks, the companies said in the statement. State Farm will commit as much as $300 million for innovation and marketing, and Google, which already has a relationship with ADT, agreed to an additional $150 million in funding, boosting its total commitment to $300 million.
“We’ve always recognized our responsibility to go beyond insurance and find ways to build stronger and safer communities for our customers and the neighborhoods we serve,” State Farm Chief Operating Officer Paul Smith said in the statement. “This partnership gives State Farm the opportunity to provide smart-home technology that takes us from our ‘repair and replace’ model to a ‘predict and prevent’ mindset.”
With its equity investment, Bloomington, Illinois-based State Farm will gain a seat on ADT’s board, and intends to designate Smith to the position. The investment is scheduled for completion early in the fourth quarter.
(Updates with details on industry practices starting in fourth paragraph.)
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