Resideo Technologies has agreed to acquire Snap One for US$10.75 per share in cash, for a transaction value of approximately US$1.4 billion, inclusive of forecasted net debt of Snap One of approximately US$460 million. Upon closing, Snap One will integrate into Resideo’s ADI Global Distribution business.
The transaction is expected to be completed in the second half of 2024. The deal 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 common shares of Snap One, have executed a written consent to approve the merger, providing stockholder approval.
“The acquisition of Snap One is an exciting step in Resideo’s continued transformation through portfolio optimisation, operational enhancements and structural cost savings actions,” said Jay Geldmacher, president and CEO, Resideo.
“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. 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.”
John Heyman, CEO, Snap One, added: “Snap One has grown from a startup built by entrepreneurial integrators to an industry leader in smart technology, delivering seamless experiences to consumers and high-quality services and support to our integrators. 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.”
The companies released more details of the financial aspect of the deal. Resideo intends to use proceeds from committed debt financing, cash on hand, and a US$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 US$26.92. Effective upon the closing, CD&R will have the right to designate two members to the Board of Directors of Resideo.
“We are excited to support Resideo on this highly strategic acquisition and in their ongoing transformation,” commented Nathan Sleeper, CEO, CD&R. “I look forward to joining Resideo’s board of directors and supporting the business as it executes on this transaction and the significant opportunity we see available over the coming years.”
In a joint statement, the companies two announced what they see as the 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 products distribution. This cross-category expansion will allow the combined organisation to materially deepen relationships with integrators.”
“Expansion of proprietary offering: The combination is expected to accelerate ADI’s existing exclusive brands strategy, leveraging Snap One’s product portfolio and product development, while providing broader availability through ADI’s network of commercial and residential integrators and omni-channel 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 margin 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 fulfilment and expanding exclusive offerings.”
“Attractive financial profile: The transaction is expected to be accretive to Resideo non-GAAP EPS in the first full year of ownership, with favourable 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.”
The US$1.4 billion sum represents a 7.4x multiple on Snap One’s adjusted EBITDA for the 12 months ended December 29, 2023, as further adjusted by including Resideo’s projected annual run-rate synergies of US$75 million.
For the first quarter ended March 30, 2024, Resideo’s preliminary expectations are for revenue of approximately US$1,485 million, compared with outlook of US$1,460 million to US$1,510 million and adjusted EBITDA above the midpoint of outlook of US$120 million to US$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 webcasted conference call at 5 p.m. ET.
