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Vivint Smart Home to merge with arm of Japanese investment giant SoftBank

Todd Pedersen, Vivint CEO, speaks at the Silicon Slopes Tech Summit at the Salt Palace Convention Center in Salt Lake City on Friday, Feb. 1, 2019. Vivint Smart Home announced a merger deal Monday, Sept. 16, 2019, that will generate almost $700 million in new capital for the company that specializes in home security and smart home automation.
Kristin Murphy, Deseret News

LEHI — Utah-born Vivint Smart Home announced a merger deal Monday that will generate almost $700 million in new capital for the company that specializes in home security and smart home automation.

Vivint announced it will merge with Mosaic Acquisition Corp., a publicly traded special purpose acquisition company. Vivint has entered into a definitive agreement to merge Vivint with a subsidiary of Mosaic and, following the merger, Mosaic will be renamed “Vivint Smart Home Inc.” Mosaic is an investment entity created by a subsidiary of Japanese investment giant SoftBank Group.

Vivint founder and CEO Todd Pedersen said the new funding will allow the 20-year-old company to leverage a “massive opportunity” in the fast-growing smart home market.

“We are excited to partner with Mosaic to unlock the next chapter of the Vivint growth story,” Pedersen said in a statement. “We remain committed to our mission of redefining the home experience through intelligently designed, cloud-enabled solutions delivered to every home by people who care. Just as it was in 1999 when I founded this business, to today where we are a multibillion-dollar enterprise, our customers remain our focus.

“As the smart home market rapidly expands globally, Vivint is in the early stage of a massive opportunity and is ready to create the future of how we live and interact with our homes.”

The company was founded in Provo by Pedersen, a former BYU student, getting its start as an alarm company in 1999 but later evolving into the smart home market and rebranding as Vivint in 2011. In 2012, New York City private equity giant Blackstone Group acquired the company for $2 billion. At the time of a Deseret News profile of the company in 2017, the Wall Street Journal reported Blackstone was seeking a buyer for the company at a valuation of around $6 billion.

Blackstone and other existing investors of Vivint are expected to own approximately 78% of the outstanding shares of Vivint immediately following the merger, according to a news release. In total, there will be approximately $690 million of net cash proceeds at closing, assuming no redemptions by Mosaic’s public stockholders. The merged company is anticipated to have an initial enterprise value of approximately $5.6 billion and an initial market capitalization of approximately $3.1 billion.

Blackstone has agreed to invest an additional $100 million in Vivint through an investment in the common stock of Mosaic immediately prior to the closing of the merger.

Affiliates of Fortress Investment Group LLC, a subsidiary of SoftBank Group Corp., have agreed to invest an additional $125 million in Vivint through an investment in the common stock of Mosaic immediately prior to the closing of the merger. This investment is in addition to the existing investments in Mosaic held by Fortress affiliates.

Pedersen told the Deseret News Monday that the evolution of the company to its current position as one of the leading smart home automation companies in the world was not on his radar when he launched APX Alarm Systems over two decades ago.

“When I started the business, I didn’t really have this outcome in mind,” Pedersen said. “It was just me and a couple of friends selling home security systems. To grow to this size, you’ve got to have a lot of intelligent and committed people involved ... and they’ve all helped get us to this point.

“Smart home is a new, but massive market segment and ... we’re well positioned to take advantage of it.

Vivint Smart Home President Alex Dunn said the smart home industry is finally catching up to the company’s vision for how connected devices, home security and automated processes would likely evolve.

“We’re not only excited about the (merger) transaction but excited about how the industry is playing out,” Dunn said. “We had a thesis early on, that wasn’t widely accepted, that delivering a true smart home experience went beyond just selling connected devices. It requires a vertically integrated system that delivers the whole experience to the consumer.”

Dunn said the approach embraced by most companies in the smart home space was that consumers would purchase the devices they wanted, install them, and figure out a way to manage what could accumulate to be a dozen or more different items.

Vivint employs a variety of sensors, coupled with a computer-based, artificial intelligence-driven control system, that can not only give homeowners the ability to control and monitor their home systems from afar, but the system can actually “learn” the habits of its owners and make adjustments that can, in Dunn’s words, “take some of the burden off the shoulders of homeowners and their families.” The system integrates with numerous, third-party devices including Amazon Echo, Google Home, Nest, Kwikset and others.

David Maura, Mosaic’s executive chairman and CEO, said Vivint’s vertical integration expertise is part of what drove the decision to pursue the merger deal.

“Having founded Mosaic in October 2017, I was determined to find not only the right target, but also the right partners,” Maura said in a statement. “Todd and Alex have built an incredible business over the past 20 years, and I am honored to be a part of the team as we look into the future. The strong subscriber momentum, compelling unit economics and multiple levers for organic growth represent a phenomenal opportunity to be at the cutting edge with technology that is changing the way we live.

“With most companies only deploying a stand-alone device strategy, Vivint differentiates itself as a fully integrated platform focused on unifying the customer experience in an efficient, seamless and simple way.”

Vivint reports it currently has over 1.5 million customers in the U.S. and Canada for whom their systems are managing over 20 million connected devices. The company had over $1 billion in revenues in 2018, is expecting some $1.5 billion in 2019 and employs 10,000, of which about half work in Utah.

Much as the world of the “internet of things” — physical objects like appliances and home devices that can communicate information and be controlled through a digital network — has exploded over the past couple of years, so have the opportunities for smart home companies like Vivint. A market report released in July by Zion Research estimates that the smart home industry, which generated just over $24 billion in 2016, could swell to over $53 billion by 2022. Researchers say the primary drivers of this growth will be “energy efficiency, home security, entertainment, convenience/productivity, remote health monitoring and connectivity.”