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NRG Energy (NRG) Expands, to Buy Vivint Smart Home for $5.2B

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NRG Energy (NRG - Free Report) announced that it has decided to acquire Vivint Smart Home, Inc. for $5.2 billion, which will expand its operation in the Essential Home Services Provider market. NRG will acquire Vivint in an all-cash transaction for $12 per share or $2.8 billion, as well as assume $2.4 billion Vivint’s debt (net of cash).

NRG Energy had a goal to become a leading provider of essential services for homes and businesses and the acquisition of Vivint Smart Home is a positive move in that direction. This agreement, which has been unanimously approved by the boards of directors of both companies.This acquisition is expected to close during the first quarter of 2023, subject to the fulfilment of all customary closing conditions.

How Will NRG Gain From This Acquisition?

The combination of NRG and VVNT will form a leading provider in the essential home solutions market and create a unique end-to-end ecosystem driven by unparalleled data and insights.

The deal will also improve and diversify NRG’s financial profile with more predictable earnings through Vivint’s subscription-based model and long-term customer agreements.

NRG’s Capital Allocation Goal

The acquisition of VVNT is not going to change NRG’s long-term capital plans. NRG intends to complete its ongoing $1 billion share repurchase program over the near term, of which $360 million was remaining as of Nov 30, 2022. In 2023, NRG expects to use its excess free cash flow to fund the Vivint acquisition, reduce acquisition-related debt and maintain its common stock dividend growth policy.

Merger and Acquisition (M&A) in Utility Space

Merger and Acquisition agreements have resumed in the Utilities space after nearly two years of a COVID-19-induced lull in M&A activities. Utilities are on the verge of a transition, with a number of utilities coming out with plans to lower emissions and go carbon neutral.

A lot of deals were signed in the first half of 2022 and a majority of them were to acquire clean natural gas utilities. The systematic acquisition of natural gas utilities will lower carbon footprints and allow the utilities to replace their old polluting generation units.

Price Performance

In the past month, shares of NRG Energy have lost 22.3%, against the industry’s 6.3% growth.


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Zacks Rank & Other Key Picks

NRG Energy currently has a Zacks Rank #2 (Buy). Some other top-ranked stocks in the same sector are NiSource Inc. (NI - Free Report) and ALLETE Inc. (ALE - Free Report) , each currently carrying the same rank as NRG. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NiSource and ALLETE’s long-term (three- to five-year) earnings growth are currently pegged at 6.8% and 9.3%, respectively.

The Zacks Consensus Estimate for 2022 earnings for NiSource and ALLETE has moved up 0.7% and 0.3%, respectively, in the past 60 days.


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