Resideo Technologies (NYSE: REZI) has agreed to buy Snap One Holdings (Nasdaq: SNPO) in a deal that strengthens its position in security products distribution.
Resideo has agreed to acquire Snap One for $10.75 per share in cash, for a transaction value of approximately $1.4 billion, including 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 12 months ended Dec. 29, 2023, as further adjusted by including Resideo’s projected annual run-rate synergies of $75 million.
Upon closing, Snap One will integrate into Resideo’s ADI Global Distribution business, according to an announcement.
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The transaction will combine ADI’s position in security products distribution and Snap One’s complementary capabilities in the smart living market and Control4 technology platforms, which is expected to drive increased value for integrators and financial returns. Together, ADI and Snap One will provide integrators an increased selection of both third-party products and proprietary offerings through an extensive physical branch footprint augmented by industry leading digital capabilities.
“The acquisition of Snap One is an exciting step in Resideo’s continued transformation through portfolio optimization, operational enhancements and structural cost savings actions,” said Jay Geldmacher, Resideo’s president and CEO.
Since its founding, Snap One has grown from a startup built by entrepreneurial integrators to an industry leader in smart technology, stated Snap One CEO John Heyman.
“This is the right next step to capture new opportunities to bring our solutions to market,” Heyman said. “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 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 organization to materially deepen relationships with integrators to better serve their customers and expand their businesses, according to the announcement.
The combined entities are expected to meaningfully accelerate ADI’s existing exclusive brands strategy, leveraging Snap One’s proprietary product portfolio and product development expertise 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 percent of sales from proprietary products in 2023 and these offerings typically carry significantly higher gross margin than third-party products, according to the announcement.
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 an 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.
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 percent 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.
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.
Evercore and Raymond James & Associates 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 fairness opinion to Snap One's board of directors. Simpson Thacher & Bartlett LLP is serving as Snap One's legal counsel.
