The Blackstone Group LP (BX) has agreed to buy Vivint Inc – a security provider, which offers home automation and technology services – for a sum of about $2 billion. The deal is anticipated to conclude by the end of the current year.
According to Reuters, Vivint was looking for buyers and had short-listed Blackstone, Ares Management LLC and GTCR LLC for this purpose. Finally, Blackstone ran past others and grabbed the opportunity. However, the official word on these developments is still awaited.
Blackstone will be acquiring Vivint from its current sponsors – including The Goldman Sachs Group, Inc. (GS), Jupiter Partners and Peterson Partners – with Vivint’s management giving up a considerable part of their ownership holdings. After the deal is closed, Blackstone will own majority of the stake in the company.
Merrill Lynch – a wing of Bank of America Corporation (BAC) – and Citigroup Inc. (C) will manage the sale process. These firms valued the company at more than 10 times its earnings before interest, taxes, depreciation and amortization (EBITDA).
As per an executive at Blackstone, Vivint's scalability and presence in an array of segments were the primary considerations for the acquisition bid. In addition to this, such companies are attractive to private equity firms mainly due to the stable subscriber fees charged from the customers, which can contribute towards servicing the debt taken on during an acquisition.
Moreover, this acquisition will help Blackstone tap into the attractive growth trajectory of Vivint. Blackstone is expected to provide capital to fund an expansion of Vivint’s services, its marketing potential to allure more clients and its access in foreign markets. As a result, Blackstone’s top line will definitely get a boost in the future.
However, one thing that draws our maximum attention is the massive number of consumer complaints that Vivint has received in the last three years and the resultant legal settlements it had to face. Considering this fact, it can be assumed that the acquisition may hurt the reputation of Blackstone to some extent.
The shares of Blackstone currently retain a Zacks #4 Rank, which translates into a short-term Sell rating.
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