Protection One's exploration of a sale of the company is a reflection of the firm's strength after six years of improving operations, CEO Richard Ginsburg said Wednesday.
The alarm-monitoring company announced Wednesday that it had hired investment bank J.P. Morgan to solicit and evaluate offers to buy all or part of the company.
The process will take two to six months.
Protection One, created by Westar in the 1990s, has its headquarters in Lawrence, but its largest alarm-monitoring facility is at 800 E. Waterman in Wichita. It also has facilities at 1020 E. English and 120 E. First St.
It is the third-largest monitoring company in the country, with revenue of $371 million over the past four quarters.
The company is 70 percent owned by private equity firms Quadrangle Group and Monarch Alternative Capital, which bought stock and debt from Westar in 2004.
Ginsburg said the owners and the executives think now is a good time to see what the company is worth.
He said the company has come through the recession better than expected. It has piled up $76.6 million in cash and just renegotiated $115 million of debt due next year to push its due date out.
"We spent six years fixing the company, improved operations and last November extended the maturities out a number of years, and the markets are much stronger than a year ago," Ginsburg said.
The stock price had risen to nearly six times its March low. On Wednesday it surged 23 percent on news of the possible sale, finishing at $8.71 a share.
Also this week, Tyco International announced a deal to merge its ADT unit with Brink's Home Security, joining the two largest alarm-monitoring companies.
Ginsburg said the timing of the two announcements was coincidental, rather than reflecting any forces driving consolidation in the industry.
The industry, he said, is relatively stable. It came through the recession with less damage than other industries.
In a conference call with analysts in November, Ginsburg and chief financial officer Darius Nevin said they expected in 2010 to invest more heavily in acquiring commercial and residential customers and even buy a few small alarm companies.
"Our business is looked at as very predictable," Ginsburg said Wednesday. "We did pretty well through the recession. There was a lot of concern about what would happen, but it's been very flat."
Ginsburg refused to speculate on potential buyers but said the Wichita call center plays a critical role in the company's operations.
That could be helpful for Wichita's work force.
Typically, there tend to be two kinds of buyers: financial and strategic.
Strategic buyers are already in the business and are looking to add customers. They may look to close facilities to improve efficiencies.
Financial buyers, such as Quadrangle and Monarch, don't have existing operations and look at the new company mainly as a money maker.