Resideo Technologies, Inc., a manufacturer and distributor of technology-driven products and solutions, and Snap One Holdings Corp., a provider of smart-living products, services, and software to professional integrators announced a definitive agreement under which Resideo has agreed to acquire Snap One for $10.75 per share in cash, for a transaction value of approximately $1.4 billion, inclusive of net debt.
Upon closing, Snap One will integrate into Resideo's ADI Global Distribution business.
Smart living
ADI and Snap One will provide integrators with both third-party products and proprietary offerings
The transaction will combine ADI's strong position in security products distribution and Snap One's complementary capabilities in the smart living market and innovative Control4 technology platforms, which is expected to drive increased value for integrators and financial returns.
Together, ADI and Snap One will provide integrators with an increased selection of both third-party products and proprietary offerings through an extensive physical branch footprint augmented by industry-pioneering digital capabilities.
Cost savings
“The acquisition of Snap One is an exciting step in Resideo’s continued transformation through portfolio optimisation, operational enhancements, and structural cost savings actions,” commented Jay Geldmacher, Resideo’s President and Chief Executive Officer.
“ADI and Snap One are highly complementary businesses and together will meaningfully enhance our strategic and operational capabilities as a significant player in attractive growth categories."
Residential and commercial applications
"We are excited about the enhanced value proposition through increased product breadth, local availability, support services, and broad market expertise, as well as the future opportunities this creates for integrators serving residential and commercial markets."
"In addition, the investment by Clayton, Dubilier & Rice is a testament to the strategic and financial merits of this transaction and provides financial flexibility as we continue to transform and optimise our portfolio. We look forward to the ADI and Snap One teams working together to drive value for all stakeholders through executing on the substantial business and financial synergies we see in combining the two businesses."
High-quality services and support
“Snap One has grown from a startup built by entrepreneurial integrators to an industry pioneer in smart technology, delivering seamless experiences to consumers and high-quality services and support to our integrators,” said John Heyman, Chief Executive Officer of Snap One.
“This is the right next step to capture new opportunities to bring our solutions to market. The future of smart living is here. Demand for connected technology products continues to grow, and Resideo is the right owner to drive our expansion. We believe this transaction will deliver compelling value to our stakeholders and will create opportunities for our people and integrator partners.”
Strategic acquisition
This cross-category expansion will allow the combined organisation to materially deepen relationships
"We are excited to support Resideo on this highly strategic acquisition and in their ongoing transformation," commented Nathan Sleeper, CD&R's Chief Executive Officer.
"I look forward to joining Resideo's Board of Directors and supporting the business as it executes this transaction and the significant opportunity we see available over the coming years."
Benefits of the transaction
- A Strong Position Across Multiple Attractive Categories:
The acquisition will combine Snap One's capabilities for smart living integrators with ADI's complementary position in adjacent security product distribution.
This cross-category expansion will allow the combined organisation to materially deepen relationships with integrators to better serve their customers and expand their businesses.
- Expansion of Proprietary Offering:
The combination is expected to meaningfully accelerate ADI's existing exclusive brands strategy, leveraging Snap One's award-winning proprietary product portfolio and product development expertise while providing broader availability through ADI's network of commercial and residential integrators and omnichannel capabilities.
The combined company intends to leverage increased opportunities around innovation to drive value for integrators through a pipeline for proprietary products. Snap One generated 66% of sales from proprietary products in 2023 and these offerings typically carry significantly higher gross margins than third-party products.
- Enhanced Integrator Value Proposition:
ADI's and Snap One's professional integrators will benefit from significant synergy on go-to-market with Snap One's e-commerce expertise and integrator support platforms and ADI's 195 stocking locations and extensive digital capabilities. The combination is expected to create a true omni-channel experience for integrators, simplifying the buying experience and enhancing product availability.
Additional opportunity exists to enhance value within the Control4 integrator base through increasing service levels, rapid product fulfillment, and expanding exclusive offerings.
- Attractive Financial Profile:
Transaction financing has been structured to allow Resideo to preserve financial flexibility for future strategic initiatives
The transaction is expected to be accretive to Resideo's non-GAAP EPS in the first full year of ownership, with favorable revenue growth and margin profile to ADI and Resideo as a whole.
Transaction financing has been structured to allow Resideo to preserve financial flexibility for future strategic initiatives.
Transaction details
The transaction is valued at approximately $1.4 billion, including the forecasted net debt of Snap One at the closing of approximately $460 million.
This represents a 7.4x multiple on Snap One's Adjusted EBITDA for the twelve months ended December 29, 2023, as further adjusted by including Resideo's projected annual run-rate synergies of $75 million.
- Customary closing conditions
The transaction is expected to be completed in the second half of 2024 and is subject to customary closing conditions, including receipt of applicable antitrust and other regulatory approvals.
The transaction has been unanimously approved by the Boards of Directors of Resideo and Snap One. Private investment funds managed by Hellman & Friedman LLC, holding approximately 72% of the outstanding common shares of Snap One, have executed a written consent to approve the merger, thereby providing the required stockholder approval for the transaction.
- Convertible preferred equity investment
Terms of the CD&R investment include a 7% coupon, payable in cash or payment-in-kind at Resideo's option
Resideo intends to use proceeds from committed debt financing, cash on hand, and a $500 million perpetual convertible preferred equity investment from Clayton, Dubilier & Rice LLC ("CD&R") to fund the transaction.
Terms of the CD&R investment include a 7% coupon, payable in cash or payment-in-kind at Resideo's option, and a conversion price of $26.92. CD&R brings a long track record of value creation through its investments and significant experience in the specialty distribution market. Effective upon the closing, CD&R will have the right to designate two members to the Board of Directors of Resideo.
Transaction conference call information
Resideo will host a conference call at 8:00 a.m. Eastern Time on April 15, 2024, to discuss the transaction.
Interested parties may join the call where related materials will be posted before the call, or by phone at 646-968-2525 or 888-596-4144 with the conference ID: 7959274.
Resideo preliminary first quarter 2024 financial results
For the first quarter ended March 30, 2024, Resideo's preliminary expectations are for revenue of approximately $1,485 million, compared with the outlook of $1,460 million to $1,510 million and Adjusted EBITDA above the midpoint of the outlook of $120 million to $140 million provided in the fourth quarter and full-year 2023 results press release dated February 13, 2024.
Resideo intends to release first quarter 2024 financial results after the close of the New York Stock Exchange on Thursday, May 2, 2024, and host a webcast conference call at 5 p.m. ET.
Advisors
Evercore and Raymond James & Associates, Inc. are acting as financial advisors and Willkie Farr & Gallagher LLP is acting as legal counsel to Resideo.
Bank of America and Morgan Stanley have provided committed financing for the transaction and are also acting as advisors to Resideo. Moelis & Company LLC and J.P. Morgan Securities LLC are serving as financial advisors to Snap One and have each provided a fair opinion to Snap One's board of directors. Simpson Thacher & Bartlett LLP is serving as Snap One's legal counsel.
