BY Richard Summerfield
NRG Energy Inc has agreed to acquire Vivint Smart Home Inc in a $2.8bn all-cash deal. Under the terms of the agreement, NRG will pay $12 per share for the company, a premium of 33.5 percent to Vivint’s closing stock price on Monday, the last day of trading before the deal was announced. NRG will also take on $2.4bn of debt as part of the deal.
According to a statement announcing the agreement, the deal will have an implied multiple of 6.3 times run-rate enterprise value to adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA).
The deal is expected to close in the first quarter of 2023, subject to customary closing conditions. Upon completion of the transaction, NRG intends to maintain a significant presence in the state of Utah, where Vivint is headquartered. The agreement has been unanimously approved by the boards of directors of both companies.
The deal will not impact NRG’s 2023 capital allocation plans, according to the company’s chief financial officer Alberto Fornaro, NRG also plans to fully execute its $1bn stock buyback authorisation. The company plans to fund the deal with about $600m in cash, $900m from its revolving credit facility and $1.39bn in new debt and preferred equity.
“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 chief executive 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, chief executive 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.”
The deal will increase NRG’s customer base to about 7.4 million across North America. The company is one of the largest US independent power producers and operates a fleet of natural gas, coal and other generating plants totalling 18 gigawatts. It is also one of the biggest retail electricity providers in Texas.