NRG Energy (NRG) to Acquire Vivint Smart Home (VVNT) for $12/Share, or $2.8 Billion
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NRG Energy, Inc. (NYSE: NRG) and Vivint Smart Home, Inc. (NYSE: VVNT) today announced they have entered into a definitive agreement under which NRG will acquire Vivint for $12 per share or $2.8 billion in an all-cash transaction with an implied multiple of 6.3x run-rate Enterprise Value to Adjusted EBITDA. The agreement has been unanimously approved by the boards of directors of both companies.
Vivint Smart Home is a leading smart home platform company whose mission is to help its nearly two million customers live intelligently by providing them with technology, products, and services to create a smarter, more efficient, and safer home. Vivint delivers an engaging customer experience through multiple devices united into a single expandable platform that incorporates artificial intelligence and machine learning into its operating system. The company’s vertically integrated business model includes hardware, software, sales, installation, support, and professional monitoring, enabling superior customer experiences and a complete end-to-end smart home experience.
The acquisition accelerates the realization of NRG’s consumer-focused growth strategy and creates the leading essential home services platform fueled by market-leading brands, unparalleled insights, proprietary technologies, and complementary sales channels. The transaction improves and diversifies NRG’s financial profile while also expanding the total market opportunity available to NRG. The annual run-rate Adjusted EBITDA, inclusive of $100 million of run-rate synergies, is $835 million.1
“Last year at our Investor Day, we presented our strategic roadmap to becoming the leading provider of essential services for homes and businesses, informed by consumer trends and underpinned by disciplined execution,” said Mauricio Gutierrez, President and CEO of NRG. “The acquisition of Vivint is a transformational step in achieving our vision. Customers want simple, connected, and customized experiences that provide peace of mind. Vivint’s smart home technology strengthens our retail platform, improves our customer experience, and increases customer lifetime value. I am excited to welcome Vivint to the NRG family.”
“We are pleased to announce a transaction that delivers immediate and compelling cash value to Vivint’s stockholders while also presenting significant opportunities to drive our company’s continued success in the years to come,” said David Bywater, CEO of Vivint Smart Home. “Our agreement with NRG is the culmination of our Board’s ongoing pursuit of maximizing value for Vivint stockholders and is a testament to the strength of the Vivint brand, capabilities, and proven industry leadership. We look forward to working with NRG to create exciting opportunities for Vivint as part of a larger platform. On behalf of our Board and management team, I thank the hard-working Vivint employees for the significant role they have played in this important milestone.”
Strategic and Financial Benefits
- Establish the Leading Provider of Essential Home Services
The combined company will be the leading essential home solutions provider, with an extensive network of approximately 7.4 million customers across North America, that represents a substantial cross-sell opportunity through market-leading brands and complementary sales channels.
- Strengthen Core Platform
The combined company forms a unique end-to-end ecosystem driven by unparalleled data and insights, resulting in a unified customer experience with a high level of engagement.
- Improve Financial Profile
The transaction will improve and diversify NRG’s financial profile with more predictable earnings through Vivint’s subscription-based model and long customer tenure (nine years).
- Maintain Disciplined Capital Allocation
The transaction exceeds NRG’s investment hurdle rates and is in line with its long-term free cash flow before growth per share growth target.
- Leverage Successful Integration Track Record
NRG has a proven track record of integration and synergy realization across a number of acquisitions, including Direct Energy, Stream, and Xoom.
NRG will acquire 100% of the outstanding equity of Vivint for a total transaction value of $5.2 billion, which consists of approximately $2.8 billion in cash and the assumption of $2.4 billion of debt (net of cash), which benefits from attractive terms and pricing. This consideration represents a premium of approximately 33% to Vivint’s closing share price on December 5, 2022.
Capital Allocation Update
NRG’s capital allocation strategy will continue to opportunistically balance its growth, return of capital, and balance sheet objectives. NRG intends to complete its existing $1 billion share repurchase program over the near term, of which $360 million was remaining as of November 30, 2022. In 2023, NRG expects to use its excess free cash flow to fund the Vivint acquisition, reduce acquisition-related debt, and maintain its common stock dividend growth policy. In 2024, the Company intends to return to its 50% return of capital / 50% growth capital allocation policy. NRG remains highly committed to its dividend growth policy, which remains unchanged from previous guidance.
Management remains committed to maintaining its strong balance sheet and credit ratings. The Company expects to achieve its investment grade credit metrics target of 2.50-2.75x Net Debt / Adjusted EBITDA by late 2025 to 2026 through the combination of debt reduction and growth.
Approvals and Time to Close
The transaction is expected to close in the first quarter of 2023 and is subject to customary closing conditions, including the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Following the execution of the definitive agreement, Vivint stockholders holding approximately 59% of the issued and outstanding shares of Vivint’s Class A common stock executed and delivered to Vivint written consents adopting and approving the transaction. No further action by Vivint stockholders is required to approve the transaction.
Upon completion of the transaction, NRG intends to maintain a significant presence in Utah.
Goldman Sachs & Co. LLC is serving as NRG’s exclusive financial advisor. Goldman Sachs Bank USA is providing fully committed financing. White & Case LLP is serving as legal counsel to NRG.
J.P. Morgan Securities LLC is serving as Vivint’s exclusive financial advisor. Simpson Thacher & Bartlett LLP is serving as legal counsel to Vivint.
On December 6, 2022, NRG and Vivint will host a conference call at 8:00 a.m. Eastern Time (7:00 a.m. Central Time) to discuss this announcement. Investors, the news media, and others may access the live webcast of the conference call and accompanying presentation materials by logging on to NRG’s website at www.nrg.com and clicking on “Presentations & Webcasts” in the “Investors” section found at the top of the home page. The webcast will be archived on the site for those unable to listen in real-time.
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