Billionaire investor George Soros joined hedge-fund manager Keith Meister in urging ADT Corp. (ADT:US) to buy back about 45 percent of its stock with borrowed money after they became the home-security company’s biggest investors.
Meister’s Corvex Management LP has a stake equal to 5.02 percent, including shared voting power from Soros Fund Management LLC, a filing showed. ADT climbed 7.4 percent to $41.16 at the close of New York trading, the biggest increase since last month’s spinoff from Tyco International Ltd. (TYC:US)
ADT should boost shareholder returns by taking advantage of low interest rates to add debt, using the proceeds to repurchase shares, New York-based Corvex said in a presentation included in the filing. Boca Raton, Florida-based ADT is undervalued even though it’s the market leader in home security, Corvex said.
Companies adopting an “equity-shrink” strategy have fared well, Corvex said. “Stable growth combined with an appropriate capital structure, ongoing share repurchases and clear investor communication of leverage target and buyback strategy has led to significant outperformance.”
ADT “has had constructive discussions with Corvex and others to understand their views,” according to a company statement following today’s filing. Corvex said it has met with management to discuss ADT’s business and strategies and plans additional conversations.
Sarah Cohn, a spokeswoman for ADT, and Michael Vachon, a Soros spokesman, declined to comment beyond the filing and statement. A telephone message left for Meister wasn’t immediately returned.
Corvex controls the equivalent of 11.5 million shares of ADT through ownership of stock and call options, which includes 575,000 shares contributed through joint voting power by Soros Fund Management, according to the filing.
ADT had 229.9 million shares outstanding as of yesterday, according to the filing. Its market value at the time was $8.8 billion, based on data compiled by Bloomberg.
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