Alphabet Inc.’s Google has agreed to pay $450 million for a stake in security firm ADT Inc. as part of a partnership to create smart-home security products.
Google will get a 6.6% stake in newly created Class-B shares of the Boca Raton, Florida-based firm, and ADT will integrate Google’s hardware and services into its products, the companies said in a statement on Monday. ADT shares jumped 66% in pre-market trading after closing at $8.61 in New York on Friday.
Both companies will commit an additional $150 million, subject to the achievement of certain milestones, for marketing, product development, technology and employee training, they said.
The deal will widen the potential reach for Google’s own smart-home devices, led by its Nest offering. ADT focuses on home security products such as electronic security, fire protection, and alarm monitoring services. ADT Chief Executive Officer Jim DeVries said “the combined solution will unlock access to new customers seeking premium technology, end-to-end smart-home services and trusted security.”
The U.S. smart-home market is experiencing “explosive gains,” DeVries said and is projected to grow 20% annually. “Together the smart home and secure market represents a tremendous opportunity for ADT and Google,” DeVries said on a call with analysts to discuss the deal.
Google bought Nest in 2014 for $3.2 billion to enter the smart-home market, and the unit has become one of the largest makers of internet-connected thermostats, smoke alarms and locks.
However Google pared back the number of companies its Nest devices connect to earlier this year due to privacy concerns. Several residential builders have also stopped buying and installing Nest devices after the internet giant overhauled how Nest technology works with other gadgets.