Blackstone Seals Vivint Acquisition - Analyst BlogTuesday, November 20, 2012
The Blackstone Group LP (BX) announced the completion of the acquisition of Vivint Inc, a security provider, which offers home automation and technology services. The acquisition worth more than $2 billion was made by Blackstone Capital Partners VI, L.P., a fund managed by Blackstone for its private equity investors.
The acquisition includes Vivint, Vivint Solar and 2GIG Technologies. Vivint Solar is one of the fastest growing solar companies in the U.S., which furnishes reasonably priced solar solutions to residential customers. On the other hand, 2GIG Technologies offers security and automation equipment for residential and small business purposes.
Vivint had earlier short-listed Blackstone, Ares Management LLC and GTCR LLC among the potential buyers. However, it was Blackstone which toppled its rivals to acquire Vivint.
Blackstone acquired Vivint from its 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. Merrill Lynch – a wing of Bank of America Corporation (BAC) – and Citigroup Inc. (C) administered the sale process.
As per an executive at Blackstone, Vivint's efficiency and presence in an array of segments were the primary considerations during the acquisition bid. In addition to this, such companies are attractive for private equity firms mainly due to the stable subscriber fees charged from the customers, which can contribute towards servicing the debt taken during an acquisition.
Moreover, this acquisition will help Blackstone tap into Vivint’s promising growth trajectory. Blackstone is expected to provide capital to fund an expansion of Vivint’s services, its marketing potential to allure more clients and its access to foreign markets. As a result, Blackstone’s top line will definitely get a boost in the near-term.
However, the massive number of consumer complaints that Vivint received in the last three years and the resultant legal settlements it had to face remain the primary concerns. Considering this, it can be assumed that the acquisition may taint the reputation of Blackstone to some extent.
The shares of Blackstone currently retain a Zacks #3 Rank, which translates into a short-term Hold rating. However, with the aforementioned acquisition having both positive and negative impacts on the company’s financials, we don't expect any significant estimate revision in either direction. Thus, the Zacks Rank is not expected to change in the near-term.
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