Security and home-automation giant Vivint Smart Home could be a public company later this year, thanks to a merger with Mosaic Acquisition Corp. (NYSE: MOSC), a special-purpose company formed in October 2017 for just such an occasion — acquiring an established firm and taking it public.

Mosaic is an investment entity created by a subsidiary of the Japanese investment giant SoftBank Group, which will rename the public company Vivint Smart Home following the reverse merger.

The New York Stock Exchange notified Mosaic in October 2018 that the company was not in compliance with NYSE’s continued listing standard that requires all listed companies to have a minimum of 300 public stockholders on a continuous basis. 

At the time, Mosaic had 45 days to present a business plan that could bring the company into compliance within 18 months. MOSC continued trading during that time and expects to meet NYSE requirements with the Vivint deal — by late 2019 or early 2020, according to a press release issued today (below).

David Maura, chairman and CEO of Mosaic, will serve on the board of director for the new Vivint Smart Home, along with Vivint founder and CEO Todd Pedersen, president Alex Dunn, and CFO Mark Davies.

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Since 2009, Maura has served as chairman and CEO of Spectrum Brands, Inc., owner of several popular consumer brands like Cutter and IAMS, as well as several small-appliance and residential-electronics companies including Kwikset, Weiser, Baldwin and Black & Decker in the door-lock category.

In a statement (see press release below), Maura said, “Having founded Mosaic in October 2017, I was determined to find not only the right target, but also the right partners. 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. “

Vivint (formerly APX Alarm Security Solutions), along with manufacturing partner 2Gig Technologies, was acquired by investment firm Blackstone Group in 2012 for more than $2 billion. Blackstone divested 2Gig to Nortek in 2013.

Since at least 2017, Blackstone has toyed around with taking Vivint public on its own for as much as $3 billion.

Vivint has been trying new sales strategies over the past few years to improve cash flow, given the enormous cost of acquiring customers — about $1,189 per new subscriber in 2018, down by more than $400 per new customer since the year prior.

This year, the company launched a new Vivint Authorized Pro program to enable third-party home-technology integrators to offer Vivint security and smart-home systems to their clients, with the Vivint technical and operations team providing installation and support. The program was a highlight at the Vivint booth during its first exhibition at the home-technology tradeshow CEDIA Expo last week.

The parties in the Vivint/Mosaic transaction agreed on an initial enterprise value of $5.6 billion. Vivint is expected to have revenues of $1.3 billion for fiscal year 2020E and Adjusted EBITDA of $530 million, implying an Adjusted EBITDA multiple of approximately 10.5x.

PRESS RELEASE, SEPT. 16, 2019

Vivint Smart Home and Mosaic Acquisition Corp. Announce Merger Agreement

PROVO, Utah & NEW YORK–(BUSINESS WIRE)–Vivint Smart Home, Inc. (“Vivint”), a leading smart home technology company that is redefining the home experience through intelligently designed cloud-enabled solutions, and Mosaic Acquisition Corp. (NYSE: MOSC) (“Mosaic”), a publicly traded special purpose acquisition company, announced they have entered into a definitive agreement to merge Vivint with a subsidiary of Mosaic. Following the merger, Mosaic will be renamed “Vivint Smart Home, Inc.” With an agreed initial enterprise value of $5.6 billion, Vivint is anticipated to have revenues of $1.3 billion for fiscal year 2020E and Adjusted EBITDA of $530 million, implying an Adjusted EBITDA multiple of approximately 10.5x.

Vivint is one of the largest smart home companies in the world, delivering integrated smart home products and cloud-enabled services to 1.5 million subscribers across 98 percent of the zip codes in the U.S., and in Canada. Vivint offers a comprehensive suite of smart home products along with professional installation, nationwide in-home service, and 24/7 professional monitoring and customer care.

Todd Pedersen, Founder and CEO of Vivint, commented, “We are excited to partner with Mosaic to unlock the next chapter of the Vivint growth story. 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 multi-billion-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.”

“Vivint has defined the smart home – becoming the industry leader on the back of its innovative products, integrated solutions, and superior customer experience,” stated Peter Wallace, a Senior Managing Director at Blackstone. “We are proud to have supported the development of the company that has set the pace for the industry and are excited by the opportunity to invest further to support Vivint’s future growth.”

Alex Dunn, President of Vivint, added, “We look forward to leveraging David Maura’s prior M&A and operational experience leading a consumer-facing company, along with Fortress’ well-established capital markets expertise as we work towards Vivint’s continued success. Proceeds from this transaction will fortify our balance sheet, and enable us to continue to drive the innovation, customer focus, and service offerings that our customers have come to expect from us. We intend to remain disciplined in our capital allocation, while driving down customer acquisition costs without sacrificing organic growth.”

Following the closing of the merger, Vivint will continue to be led by its experienced management team, including founder and Chief Executive Officer Todd Pedersen, President Alex Dunn and Chief Financial Officer Mark Davies. All existing Vivint directors will serve on the board of directors of the combined company, joined by David Maura from Mosaic and, after the closing and subject to regulatory approval, by a director from the SoftBank Vision Fund.

David Maura, Executive Chairman and Chief Executive Officer of Mosaic Acquisition Corp., commented, “Having founded Mosaic in October 2017, I was determined to find not only the right target, but also the right partners. 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 standalone device strategy, Vivint differentiates itself as a fully integrated platform focused on unifying the customer experience in an efficient, seamless and simple way. I would like to congratulate Vivint and am pleased to confirm the Mosaic Board of Directors’ unanimous support for this transaction.”

Drew McKnight, Managing Partner of Fortress Investment Group LLC, commented, “We have followed Vivint for a long time and have deep respect for the company and its leadership team. We believe Vivint is extraordinarily well positioned as a leading IoT and connected-device business at an inflection point in the evolution of an industry. We are extremely excited about this investment and the opportunity to partner with Blackstone and the Vivint management team as the company builds on its position of recognized leadership and innovation shaping the connected world of tomorrow.”

Summary of Transaction

On September 15, 2019, Vivint entered into a definitive merger agreement with Mosaic. 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 billion³. References to Vivint following the completion of the merger are to Mosaic after its change in name to “Vivint Smart Home, Inc.”

In connection with this transaction:

• Investment funds affiliated with The Blackstone Group Inc. (“Blackstone”) and other existing investors of Vivint, including management, are retaining their full existing investment.
• 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 (“Fortress”), 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.
• The remaining outstanding shares of Vivint will be held by the current stockholders of Mosaic and certain other investors who are investing $150 million in connection with the merger pursuant to forward purchase commitments obtained in connection with Mosaic’s IPO, which includes $25 million from Fortress. Additionally, David Maura is committing to purchase $5 million under a 10b5-1 trading plan.
• Pro forma net leverage reduced from 5.5x to 4.3x LTM 6/30/2019 Covenant Adjusted EBITDA, with substantially all net proceeds expected to be used to repay debt.

Blackstone and other existing investors of Vivint are expected to own approximately 78 percent of the outstanding shares of Vivint immediately following the merger. In total, there will be approximately $690 million of net cash proceeds at closing, assuming no redemptions by Mosaic’s public stockholders, including the $150 million of forward purchase commitments obtained in connection with Mosaic’s IPO. The net cash proceeds from these transactions, including Mosaic’s cash on hand, are expected to be used for working capital and general corporate purposes, including to pay down a portion of existing Vivint debt.

The transaction is expected to be completed during the fourth quarter of 2019 or the first quarter of 2020, subject to approval by Mosaic and Vivint stockholders and other customary closing conditions. The boards of directors of both Vivint and Mosaic have unanimously approved the proposed transaction. Mosaic will apply to list the shares of its common stock being issued in connection with the merger on the New York Stock Exchange.

Vivint and Mosaic intend to host a joint conference call providing further details on the transaction on September 16, 2019.

Conference Call Details

Webcast: www.investors.vivint.com/events-presentations/events

A replay of the webcast will be made available for 30 days on the investor relations page of Vivint’s website at www.investors.vivint.com.

Advisors

J.P. Morgan Securities LLC, Evercore and Blackstone Capital Markets are acting as financial advisors and capital markets advisors to Vivint. Deutsche Bank Securities, Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC and RBC Capital Markets LLC are acting as financial advisors and capital markets advisors to Mosaic.

Simpson Thacher & Bartlett LLP is acting as legal counsel to Vivint. Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal counsel to Mosaic. Fried, Frank, Harris, Shriver & Jacobson LLP is acting as legal counsel to Fortress.

About Mosaic

Mosaic Acquisition Corp. is a special purpose acquisition company formed by Mosaic Sponsor, LLC and Fortress Mosaic Sponsor LLC for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. For more information, visit www.mosaicac.com.

About Vivint Smart Home

Vivint is a leading smart home company in North America. Vivint delivers an integrated smart home system with in-home consultation, professional installation and support delivered by its Smart Home Pros, as well as 24/7 customer care and monitoring. Dedicated to redefining the home experience with intelligent products and services, Vivint serves 1.5 million customers throughout the United States and Canada. For more information, visit www.vivint.com.

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