Exploring utility/security synergies
Exploring utility/security synergies

Aug 1, 1997 12:00 PM

Western Resources' corporate strategy for the future is to provide four streams of technology - energy, security, telephone and entertainment. Topeka, Kan.-based Western Resources is a diversified service company with two utility subsidiaries, Kansas Power and Light and Kansas Gas and Electric. Operating in Kansas and Oklahoma, they provide natural gas and electricity to more than 1.2 million customers. With assets totaling more than $6 billion, Western Resources operates internationally through its subsidiary, the Wing Group. Last year, Western Resources struck a strategic alliance with ONEOK Inc. of Tulsa, Okla., which created the eighth largest natural gas distribution company in the country. The natural gas assets of Western Resources will be contributed to ONEOK in exchange for a 45 percent ownership position.

A large security subsidiary Through subsidiary Westar Security, Western Resources provides monitored security services in 46 states. With more than 430,000 customers, Westar Security is the third largest security services company in the United States. Westar offers integrated fire detection, access control, intercom and closed-circuit camera systems for remote or on-site monitoring.

Western Resources' growth strategy is based on the premise that security and energy are provided similarly; both offer 24-hour service, field service personnel, recurring billing, safety and reliability in service and trusting reputations in the eyes of the public. And, given that the energy industry is on the verge of deregulation, utility companies have the opportunity to develop branded identity through security services. To do so, Western Resources is identifying existing security and energy companies for acquisition and continuing to expand its current operations.

In early 1997, Western Resources acquired a company that manufactures uninterruptible power-supply and power-surge protection equipment for large industrial and residential applications. During the same period, Western Resources acquired an alarm services company to enhance 24-hour service and building maintenance.

Making headlines

Western Resources made Wall Street headlines with an attempted unsolicited bid acquisition of ADT Ltd. in December 1996. The bid, widely considered too low, ultimately failed. The deal would have made Westar Security the world's largest monitored security services provider. On July 2, 1997, Western Resources withdrew its $3.9 billion bid, clearing the way for ADT to complete a $5.7 billion merger with Tyco International Ltd.

With an estimated 7 percent U.S. market share, ADT is considered North America's leading provider of security services. Having a customer base of 65 percent residential and 35 percent commercial, ADT offers computerized security integration systems to large national accounts and has more than $13 billion in annual revenues.

Tyco International is a worldwide manufacturer of industrial products, including disposable medical products, packaging materials, flow control products and electrical components. The world's largest manufacturer and installer of fire and safety systems and services, Tyco operates in 50 countries and reports revenues of more than $6 billion.

Western Resources owns 27 percent of ADT and stands to gain $710 million on its conversion of ADT stock into Tyco stock. According to John E. Hayes Jr., chairman and chief executive officer, "Our strategy of investing in the security business has paid off in two ways - a huge gain through ADT and a leading position as the third largest security company in the industry."

Deregulation makes utilities attractive

One reason utility companies such as Western Resources are entering the security service market is deregulation. Deregulated power service allows customers to choose among competitive providers who hope to expand their customer base. A second reason utilities will target security is the tremendous growth potential. With the largest electronic monitoring company having only 7 percent market share, it is easy to see the potential for customer service-oriented providers.

"While our utility operations are based in Kansas and Oklahoma, the long-range future of the company is in the rest of the United States and internationally," says Hayes. "We will be in competition to retain the business of our existing customers as others attempt to sell them. Therefore, we must move to other markets ourselves. That's what we're preparing to do, and our Westar brand accomplishes that for us."

Targeting the security market

Western Resources began its security market growth strategy in November 1995 and has acquired several companies, the most notable being Westinghouse Security Systems. "The financials and growth of the industry are attractive," comments Steve Millstein, president of Westar Security. "When we talked to utility and security customers around the country, we found that utility companies have the characteristics we look for. These are some of the characteristics of Westinghouse Security Systems: size, stability and quality."

Westinghouse Security Systems' capacity is unlimited, says Millstein. And, with four central stations, they can service about a half million customers without further expansion.

Westar Security Services

*Electronic access control services *Closed-circuit television systems *Commercial fire alarm systems *Commercial/industrial intrusion alarm systems *Commercial/industrial sound and intercom systems *Remote access control and guard services *Entry/exit monitoring reports *Monitored store openings and closings *Pager notifications *Critical systems monitoring *Unmanned remote locations monitoring *Consulting, design, inspection and specifications *After-hours monitoring services *Total systems integration

Offering analysis and commentary on the security industry at large, our goal is to keep readers informed of the market growth and forward move-ment within the industry. The column is authored by Tina D'Aversa-Williams, publisher of Access Control and Security Systems Integration, whose background includes work in market research and analysis. We want your feedback.

Send comments to: Access Control and Security Systems Integration, Attn: Editorial Comments, 6151 Powers Ferry Road, Atlanta, GA 30339; or e-mail us at tdaversa@mindspring.com.

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