Acquisition Positions NRG as the Leading
Essential Home Services Provider, Accelerating Growth Plan
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.
Financial Terms
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.
Advisors
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.
Investor Call
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.
About NRG
At NRG, we’re bringing the power of energy to people and
organizations by putting customers at the center of everything we
do. We generate electricity and provide energy solutions and
natural gas to millions of customers through our diverse portfolio
of retail brands. A Fortune 500 company, operating in the United
States and Canada, NRG delivers innovative solutions while
advocating for competitive energy markets and customer choice,
working towards a sustainable energy future. More information is
available at www.nrg.com. Connect with NRG on Facebook, LinkedIn,
and follow us on Twitter @nrgenergy.
About Vivint
Vivint is a leading smart home company in the United States.
Vivint delivers an integrated smart home system with in-home
consultation, professional installation and support delivered by
its Smart Home Pros, as well as 24-7 customer care and monitoring.
Dedicated to redefining the home experience with intelligent
products and services, Vivint serves more than 1.9 million
customers throughout the United States. For more information, visit
https://www.vivint.com.
Forward-Looking Statements
In addition to historical information, the information presented
in this press release includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Exchange Act. These statements involve
estimates, expectations, projections, goals, assumptions, known and
unknown risks and uncertainties and can typically be identified by
terminology such as “may,” “should,” “could,” “objective,”
“projection,” “forecast,” “goal,” “guidance,” “outlook,” “expect,”
“intend,” “seek,” “plan,” “think,” “anticipate,” “estimate,”
“predict,” “target,” “potential” or “continue” or the negative of
these terms or other comparable terminology. Such forward-looking
statements include, but are not limited to, statements about the
Company’s future revenues, income, indebtedness, capital structure,
plans, expectations, objectives, projected financial performance
and/or business results and other future events, and views of
economic and market conditions.
Although NRG and Vivint each believes that its respective
expectations are reasonable, neither can give assurance that these
expectations will prove to be correct, and actual results may vary
materially. Factors that could cause actual results to differ
materially from those contemplated herein include, among others,
the occurrence of any event, change or other circumstances that
could give rise to the termination of the merger agreement, the
inability to complete the proposed transaction due to the failure
to satisfy other conditions to completion of the proposed
transaction, including that a governmental entity may prohibit,
delay or refuse to grant approval for the consummation of the
transaction, risks related to disruption of management’s attention
from NRG’s or Vivint’s ongoing business operations due to the
transaction, the effect of the announcement of the proposed
transaction on NRG’s or Vivint’s relationships with its customers,
operating results and business generally, the risk that the
proposed transaction will not be consummated in a timely manner,
the risk that actual costs could exceed the expected costs of the
proposed transaction, general economic conditions, hazards
customary in the power industry, weather conditions and extreme
weather events, competition in wholesale power and gas markets, the
volatility of energy and fuel prices, failure of customers or
counterparties to perform under contracts, changes in the wholesale
power and gas markets, changes in government or market regulations,
the condition of capital markets generally, NRG’s or Vivint’s
ability to access capital markets, the potential impact of COVID-19
or any other pandemic on NRG’s or Vivint’s operations, financial
position, risk exposure and liquidity, (including on Vivint’s
customers and timing of payments, the sufficiency of Vivint’s
credit facilities, and Vivint’s compliance with lender covenants),
data privacy, cyberterrorism and inadequate cybersecurity, the loss
of data, unanticipated outages at NRG’s generation facilities,
adverse results in current and future litigation, failure to
identify, execute or successfully implement acquisitions or asset
sales, NRG’s ability to implement value enhancing improvements to
plant operations and companywide processes, NRG’s ability to
achieve its net debt targets, NRG’s ability to achieve or maintain
investment grade credit metrics, NRG’s ability to proceed with
projects under development or the inability to complete the
construction of such projects on schedule or within budget, the
inability to maintain or create successful partnering
relationships, NRG’s ability to operate its business efficiently,
NRG’s ability to retain retail customers, NRG’s ability to execute
its market operations strategy, the ability to successfully
integrate businesses of acquired companies, including Direct
Energy, NRG’s ability to realize anticipated benefits of
transactions (including expected cost savings and other synergies)
or the risk that anticipated benefits may take longer to realize
than expected. NRG’s ability to execute its Capital Allocation
Plan, the ineffectiveness of steps Vivint takes to reduce operating
costs, risks of the smart home and security industry, including
risks of and publicity surrounding the sales, subscriber
origination and retention process, the highly competitive nature of
the smart home and security industry and product introductions and
promotional activity by Vivint’s competitors, the impact of
litigation, complaints, product liability claims and/or adverse
publicity, the impact of changes in consumer spending patterns,
consumer preferences, local, regional, and national economic
conditions, crime, geopolitical tensions, weather, and demographic
trends, the impact of changes to prevailing economic conditions,
including increasing interest rates, rising inflation and the
expiration of federal, state and local economic stimulus programs,
adverse publicity and product liability claims, increases and/or
decreases in utility and other energy costs and increased costs
related to utility or governmental requirements, cost increases or
shortages in smart home and security technology products or
components, including disruptions in Vivint’s supply chains, the
impact on Vivint’s business, results of operations, financial
condition, regulatory compliance and customer experience of the
Vivint Flex Pay plan, risks related to Vivint’s exposure to
variable rates of interest with respect to its revolving credit
facility and term loan facility, Vivint’s inability to maintain
effective internal control over financial reporting and Vivint’s
inability to attract and retain employees due to labor shortages.
Achieving investment grade credit metrics is not an indication of
or guarantee that the Company will receive investment grade credit
ratings. Debt and share repurchases may be made from time to time
subject to market conditions and other factors, including as
permitted by United States securities laws. Furthermore, any common
stock dividend is subject to available capital and market
conditions.
Neither NRG nor Vivint undertakes any obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by law.
The foregoing review of factors that could cause NRG’s actual
results to differ materially from those contemplated in the
forward-looking statements included in this press release should be
considered in connection with information regarding risks and
uncertainties that may affect NRG's future results included in
NRG's filings with the Securities and Exchange Commission at
www.sec.gov.
For a more detailed discussion of these factors as it relates to
Vivint, see the information under the captions “Risk Factors” and
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in Vivint’s most recent Annual Report on
Form 10-K filed with the Securities and Exchange Commission (“SEC”)
on March 1, 2022, in Vivint’s most recent Quarterly Report on Form
10-Q filed with the SEC on November 9, 2022, and in subsequent SEC
filings. Vivint’s forward-looking statements speak only as of the
date of this communication or as of the date they are made.
Additional Information and Where to Find It
This communication is being made in respect of the proposed
acquisition of Vivint by NRG. In connection with the proposed
transaction, Vivint will file with the SEC and furnish to Vivint’s
stockholders an information statement and other relevant documents.
This communication does not constitute a solicitation of any vote
or approval. Vivint stockholders are urged to read the information
statement when it becomes available and any other documents to be
filed with the SEC in connection with the proposed transaction or
incorporated by reference in the information statement because they
will contain important information about the proposed
transaction.
Investors will be able to obtain free of charge the information
statement and other documents filed with the SEC at the SEC’s
website at https://www.sec.gov. In addition, the information
statement and Vivint’s annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and amendments to
those reports filed or furnished pursuant to section 13(a) or 15(d)
of the Securities Exchange Act of 1934 are available free of charge
through Vivint’s website at https://investors.vivint.com as soon as
reasonably practicable after they are electronically filed with, or
furnished to, the SEC.
1 Based on the mid-point of Vivint’s 2022 Adjusted EBITDA
guidance as disclosed in its third quarter earnings release filed
with the SEC on November 8, 2022 of $735 million, plus $100 million
of synergies. Reconciliations of Vivint’s Adjusted EBITDA to net
loss is not available on a forward-looking basis without
unreasonable efforts due to the high variability, complexity, and
uncertainty with respect to forecasting and quantifying certain
amounts that are necessary for such reconciliations, including net
loss and adjustments that could be made for impairment charges,
restructuring charges and the timing and magnitude of other amounts
included in the reconciliations. The probable significance of the
unavailable information is also unknown, which could have a
potentially unpredictable, and potentially significant, impact on
future GAAP financial results.
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version on businesswire.com: https://www.businesswire.com/news/home/20221206005494/en/
NRG:
Media: Hasting Stewart VP, Communications
hasting.stewart@nrg.com
Investors: Kevin L. Cole, CFA SVP, Investor Relations
kevin.cole@nrg.com
Vivint:
Media Noelle Bates VP, PR press@vivint.com
Or
Ed Trissel / Joseph Sala / Kara Sperry Joele Frank, Wilkinson
Brimmer Katcher (212) 355-4449
Investors: Nate Stubbs VP, Investor Relations
ir@vivint.com
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