NRG Energy to buy Vivint Smart Home for $2.8B
NRG will look to cross-sell and bundle the two companies’ energy and home-security products
NRG Energy Inc. said it agreed to buy home-security business Vivint Smart Home Inc. for $2.8 billion in cash, as the energy-services company pushes to have a presence in more American homes.
NRG said Tuesday it would pay $12 a share for Vivint, which offers integrated home systems that include security, lighting and other services. The price marks a 33% premium to Vivint’s closing price on Monday of $8.99 a share. Including debt, the companies put the total deal value at $5.2 billion.
The combination, expected to close in the first quarter of 2023, will allow Houston-based NRG to integrate its home-energy services into Vivint’s home system. NRG will also get Vivint’s back-end technology, which includes an app for smartphones, as well as a chance to expand its product offerings to include home security and automation.
Shares of NRG fell 15% to $34.78, on pace for their largest one-day percent decline since March 2021. Vivint shares rose 32% to $11.89.
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"More than ever, consumers have an expectation that all of these pieces can be connected in a way that provides a seamless experience," NRG Chief Executive Mauricio Gutierrez said on a conference call with analysts to discuss the deal. "And that is what NRG plus Vivint will do together."
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NRG will look to cross-sell and bundle the two companies’ energy and home-security products to customers, said Mr. Gutierrez, citing NRG’s battery-storage products as one product that could benefit. The geographic overlap of NRG and Provo, Utah-based Vivint also will allow for rapid deployment in key markets.
The data collected by Vivint will also help NRG effectively bundle its products and improve pricing, Mr. Gutierrez said.
Vivint said in November that it expected to have more than 1.9 million subscribers by the end of the year. The company has said its average customer installs about 15 devices in their home, interacts with their smart-home system more than 12 times a day and retains service for about nine years. It is targeting as much as $1.67 billion in revenue this year.
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The deal won’t affect NRG’s 2023 capital allocation plans, Chief Financial Officer Alberto Fornaro said, and the company plans to fully execute its $1 billion stock buyback authorization. The company plans to fund the deal with about $600 million in cash, $900 million from NRG’s revolving credit facility and $1.39 billion in new debt and preferred equity.
"Based on our conversation with the rating agencies we don’t expect that this transaction will have a material negative impact on our credit profile," he said.
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However, S&P Global Inc.’s credit-ratings firm put NRG’s BB+ issuer credit rating on credit watch negative Tuesday morning, reflecting the potential that S&P could downgrade the rating by a notch. S&P says the deal carries execution risks, particularly amid a potential economic downturn, and that it expects NRG to fund the deal largely with debt.