Resideo Technologies, Inc. has announced a definitive agreement to acquire Snap One Holdings Corp. for $10.75 per share in cash. The transaction is valued at approximately $1.4 billion, inclusive of net debt of around $460 million, according to a statement.
In pre-market activity on the Nasdaq, Snap One shares were climbing more than 30% to trade at $10.61.
Resideo further announced its preliminary first-quarter expectations for revenue of around $1.485 billion, compared with outlook of $1.460 billion to $1.510 billion. Adjusted EBITDA would be above the midpoint of outlook of $120 million to $140 million, according to a statement.
Resideo to Acquire Snap One, Boosting Smart Living and Security Offerings
Resideo says the acquisition of Snap One is expected to be completed in the second half of 2024, subject to closing conditions, including receipt of applicable antitrust and other regulatory approvals.
Upon closing, Snap One will integrate into Resideo’s ADI Global Distribution business.
The acquisition would combine ADI’s position in security products distribution and Snap One’s complementary capabilities in the smart living market and Control4 technology platforms. 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.
The deal is expected to be accretive to Resideo adjusted earnings per share in the first full year of ownership, with favorable revenue growth and margin profile to ADI and Resideo as a whole.
The transaction has been unanimously approved by the Boards of Directors of Resideo and Snap One.
Resideo says it 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 to fund the transaction.
Resideo’s Strategic Snap One Acquisition
“The acquisition of Snap One is an exciting step in Resideo’s continued transformation through portfolio optimization, operational enhancements and structural cost savings actions,” comments Jay Geldmacher, Resideo’s President and Chief Executive Officer.
He continues, “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. 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 optimize 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.”
John Heyman, CEO of Snap One, says, “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.” He continues, “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.”
Nathan Sleeper, CD&R’s CEO, says, “We are excited to support Resideo on this highly strategic acquisition and in their ongoing transformation. 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.”
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 position in adjacent security products distribution. This cross-category expansion will allow the combined organization to materially deepen relationships with integrators to better serve 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 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% of sales from proprietary products in 2023 and these offerings typically carry significantly higher gross margin than third-party products, according to a statement from Resideo.
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 digital capabilities. The combination is expected to create a 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 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.
UPDATE: Commercial Integrator & sister-publication CEPro reached out to executives at Resideo and SnapOne for further comments. Read more about what Rob Aarnes, President of ADI and John Heyman, CEO of Snap One had to say about the deal in this article here.
