NRG Energy, Inc. To Acquire Vivint Smart Home, Inc. -- EnergyChoiceMatters.com

NRG Energy, Inc. To Acquire Vivint Smart Home, Inc.

December 6, 2022

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Reporting by Paul Ring • ring@energychoicematters.com

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NRG Energy, Inc. and Vivint Smart Home, Inc. 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 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," the companies said

"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."

Vivint Smart Home is a smart home platform company with nearly two million customers that provides 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 companies said

"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," the companies said

"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," the companies said

"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)," the companies said

"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," the companies said

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.

"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," NRG said

"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," NRG said

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," the companies said

The agreement has been unanimously approved by the boards of directors of both companies.

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