South Korea’s large conglomerate SK Group that is seeking ways to expand its presence in the Internet of Things (IoT) technology-based smart home and office market has embarked on negotiations to acquire major security monitoring and dispatch service provider ADT Caps.

According to the investment banking industry on Wednesday, the Korean conglomerate is in the early stages of negotiations with U.S.-based private equity fund Carlyle Group to buy the global private equity investment giant’s stake in the security company. Sources said both sides are reviewing various options for the size of stakes up for grabs - minimum 35 percent interest or up to 100 percent. The value of full stake in ADT Caps is currently estimated at around 2.5 trillion won ($2.2 billion), but it is still early to discuss about the price as the negotiations just began.

The two parties are expected to sign a memorandum of understanding (MoU) to proceed the deal soon and conduct due diligence, according to sources.

ADT Caps is the country’s second largest security company following S-1 Corp., a comprehensive security solution unit of Samsung Group. Carlyle Group bought the security company at $1.93 billion from U.S.-based Tyco International in 2014. Back then, SK Telecom Co., telecommunications arm of SK Group, also joined the race to bid for ADT Caps, but it later decided to buy the country’s fourth largest security monitoring company Neos Networks Co.

This time, however, SK Holdings, the holding company for SK Group, is said to be bidding for ADT Caps. SK Holdings was merged with SK C&C that specializes in the IoT service solutions in August last year, and ADT Caps’ customer network and security technology is expected to create synergy effects with SK C&C’s IoT technology that would accelerate the group’s efforts to nurture smart home and office business as its growth engine. Market observers also expect that as SK Group Chairman Chey Tae-won is a registered board director and chairman of SK Holdings, the two sides would finalize the deal in a prompt manner.

ADT Caps posted 122.5 billion won in operating profit and 666.4 billion won in sales last year. The company has a 29 percent market share in the local security market, ranking second following S-1 with 53 percent.

By Jung Wook and Kang Doo-soon

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