Vivint to be sold to Blackstone in $2 billion deal

CEO Pedersen: Vivint has plans to become one of the largest national players in commercial security
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Tuesday, September 18, 2012

PROVO, Utah—Vivint has entered into an agreement with the Blackstone Group to be acquired in a deal worth “north of $2 billion,” Todd Pedersen, Vivint CEO, told Security Systems News.

“We’re pretty happy about it,” he said.

The deal, which Security Systems News did some initial reporting on last week, is expected to close before the end of the year.

Blackstone will buy out Vivint’s current equity partners Goldman Sachs, Jupiter Partners and Peterson Partners. Vivint management, which previously controlled 50 percent, also “sold some equity,” so Blackstone is now the majority owner of the company, Pedersen said.

Now that it's the majority owner, how will Blackstone, which manages more than $190 billion in assets, change things internally at Vivint?

It won’t, Pedersen said.
 
The Blackstones of the world don’t want to run the companies they invest in, he said. “They want to invest in well-run companies that are growing and have a huge upside promise,” Pedersen said. “This means more opportunities for our employees. This is going to super-charge Vivint’s ability to go to market with new services.”

“They’re committed to giving us the resources to really brand the company, not as a security company, but as a home technology service company,” he said.

Pedersen said the plan is to “continue to focus on more technology, to launch new services and to grow market share substantially.”
 
Among the new services Vivint is contemplating offering is “basic in-home health care,” Pedersen said. That service will include a PERS-style component, but he envisions a “much broader, deeper, richer service. It’ll be a range of services.”

Vivint also plans to go international. It will launch all of its current services, with the exception of its solar offerings, in Australia as early as this fall.

Commercial security is also part of the plan “at some point next year,” Pedersen said. Furthermore, he believes the company has the ability to become one “of the largest national players in the commercial space in short order.”

Vivint does some very limited commercial business right now, primarily for its residential customers who own small businesses.

The previous credit facility wouldn’t allow for real expansion into the commercial market, he said. “If we’d had a credit facility that was flexible enough, we would have tens of thousands of commercial customers right now.”

The company will enter the commercial space in a methodical way, he said. Will the company also venture into systems integration? Pedersen said yes, but it will “do one before the other.”

“I look at the building next door and I think they should have solar panels, access control, security cameras [and] lighting controls, and we should be providing all of it to them,” he said.

What about acquisitions? “You never say never, but we are great at creating the customer,” he said.

Pedersen praised Goldman Sachs, Jupiter Partners and Peterson Partners and said he’s happy that the deal with Blackstone will “give them an opportunity to exit with a huge multiple,” noting that “we were not a $1.9 billion company in 2006 when they invested. Their return on capital has been outstanding.”

Pedersen estimated that in 2006, Vivint, then APX Alarm, was a $100 million company.

Citibank and Bank of America/Merrill Lynch advised Vivint on the deal.

The companies included in the deal are Vivint, Vivint Solar and 2GiG, a provider of home security and automation systems. Pedersen said that other than being an investor in 2GIG and asking the company to provide certain products, he’s been hands-off, leaving Todd Santiago (2GIG president) and his team alone to run their business.

Pedersen said nothing would change with Blackstone as the owner of 2GIG. “Blackstone isn’t in the business of building and engineering technology,” he said.

Security Systems News asked Todd Santiago to clarify the relationship between Vivint and 2GIG now and after the sale to Blackstone. "2GIG was not and is not owned by Vivint. That misconception stems from the fact that we have similar investors that include Goldman, Jupiter and Todd Pedersen. It is important to note that 100 percent of 2GIG's shares are being purchased as part of this transaction. Current management will stay in place and the plan is to aggressively grow our business both domestically and internationally. We are very excited about the future and are committed to building on our track record of bringing industry-changing products to market.  We are grateful for the support of hundreds of dealers that depend on our products and we are confident that we will continue to exceed their expectations." 

Pedersen predicted Blackstone will also let Vivint Solar be autonomous. He also believes Vivint Solar “will have the largest residential solar customer base in 18 months in the U.S."

“Vivint with more access to capital, and cheaper capital, is a stronger Vivint,” Pedersen said.

He said the company would be "thoughtful around R&D spending and adding additional service layers onto the platform. We’re going to stay ahead of the game.”

This deal comes amid a flurry of M&A activity in the security space. Pedersen called that activity and this deal “a vote of confidence around a space that was not recognized or paid attention to a few years back.” He said he has “a lot of respect for a lot of Vivint competitors who run great companies. I think there’s a lot of upside for all, but we’re going to compete hard.”

Pedersen said the company’s growth plans are “aggressive but attainable.” Asked if Vivint would double in size in the next five years, Pedersen said, "If we only double our enterprise value in the next five years, I hope they fire me."