Vivint exploring sale

CEO said $2 billion offer from Blackstone previously turned down
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Thursday, September 6, 2012

PROVO, Utah—Vivint is considering a sale with final bids due later this month, according to a Reuters report. The report said the home automation/home security company could be valued at as much as $2 billion, and that among three private equity groups looking at the company is GTCR—owner of Protection 1, one of the nation’s largest security companies.

Reuters, citing unnamed sources, reported that other possible buyout firms are the Blackstone Group LP and Ares Management LLC.

Contacted by Security Systems News, Alex Dunn, Vivint COO, declined to comment on the report.

However, the sale has been rumored for months, and Vivint CEO Todd Pedersen talked openly of plans to replace the company’s current equity partner, Goldman Sachs Group, at an entrepreneurship lecture he gave in April at Utah Valley University.

Pedersen also said in his lecture—which was recorded and posted on YouTube—that Vivint had previously received a $2 billion bid for the company, which it declined.

“I received an unsolicited offer three or four months ago from Blackstone, the largest private equity firm in the world,” Petersen said. “They said, ‘Hey, we’re interested in buying your company.’ Made us an offer right at about $2 billion, and we turned it down.”

According to the Reuters report, GTCR, Blackstone and Ares Management  “are weighing bids for the company, with the auction well into the second round.” It also said Vivint, a summer-sales-model company based here, is working with Bank of America Merrill Lynch and Citigroup as it looks for a buyer.

Will Schmidt, managing director for CapitalSource’s Security Lending Group, told SSN that the fact that "Goldman Sachs and other investors [which includes both management at Vivint and Jupiter Partners and Peterson Partners] are looking to sell and want to get liquidity is just a natural part of the private equity investment cycle."

The timing, however, is particularly fortuitous for sellers. “The debt, equity and sub-debt markets are all very strong and receptive to financing security transactions,” Schmidt said. “It’s the right time to be considering a sale.”

Schmidt said Vivint has a “combination of strong growth and a large customer base that generates predictable recurring revenue that is attractive to financial buyers.”

Reuters said sources said Vivint “has about $260 million in earnings before interest, tax, depreciation and amortization (EBITDA) and could be valued at between $1.5 billion and $2 billion in a sale.”

Pedersen founded Vivint in 1999. Formerly called APX Alarm Security Solutions, Vivint rebranded in February 2011 to underscore its expansion into the rapidly growing home automation market. Today, Vivint describes itself as the largest home automation services company in North America, and says it has more than 600,000 customers in the United States and Canada.

Management retains ownership in half of Vivint, while the rest is owned by the Goldman Sachs Group as well as investment firms Jupiter Partners LLC and Peterson Partners, Reuters reported.

Pedersen said in his April university lecture: “This year, and I’m a pretty open book, we’re going through a process to get Goldman Sachs, [and] my two private equity partners bought out. We’ve grown by about 20 to 25 times since they invested six years ago. There’s a life cycle to partners. And there’s a usefulness of partners.

“Partners are very important,” Pedersen continued. “So we’re going to sell, but it’s going to be them selling. I might sell a little equity. I don’t know. But to bring a new partner in to help us expand internationally and expand the existing services we have.”

Tiffany Galvin, a spokeswoman for Goldman Sachs, declined to comment to SSN. She did confirm to SSN that Goldman is a minority investor and a lender in the business.

This spring, Vivint closed a $762 million refinancing, led by Goldman Sachs Specialty Lending Group and including 19 other lenders.

Then, this summer, Vivint added another $50 million to its financing, bringing its total senior debt financing to $812 million. It also announced then that it had passed a $30 million milestone in RMR, putting it among the nation’s top three security companies.

The company declined at that time to discuss details of that financing, issuing a statement to SSN that it would not issue “public statements in regards to our financials at this time.”

Vivint this week also announced that it has won a top spot on a list of the 50 fastest growing companies in Utah. The company said in its Sept. 5 announcement that it garnered a No. 5 position on the 2012 Fast 50 annual list, compiled by Utah Business magazine. The company said placement on the list is based on an examination of recent revenue growth.

—Tess Nacelewicz and Amy Canfield contributed to this story