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Mosaic Acquisition Corporation *

Mosaic Acquisition Corporation *

Oct 19, 2020 by Roman Developer

PROPOSED BUSINESS COMBINATION:  Vivint Smart Home, Inc.

ESTIMATED CURRENT FUNDS in TRUST: $355.4 Million*
CURRENT PER SHARE REDEMPTION PRICE: $10.30*
IMPLIED ENTERPRISE VALUE: $4.1 Billion

 

*SPACInsider estimate a/o 1-13-20

Mosaic Acquisition Corp. proposes to merge with Vivint Smart Home, Inc. (“Vivint”), a leading smart home technology company with whopping 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 intends to use proceeds from the transaction to immediately pay down debt and position the Company to further capitalize on growth initiatives.

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 suite of smart home products that differentiates itself from competitors such as Nest, by also incorporating professional installation, a nationwide in-home service, and 24/7 professional monitoring and customer care.

Following the closing of the merger, Vivint will continue to be led by its 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.

KEY TRANSACTION TERMS

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.

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 (over $2.3 billion of equity)
  • Blackstone has agreed to invest an additional $100 million in Vivint.
  • Affiliates of Fortress Investment Group LLC (“Fortress”), a subsidiary of SoftBank Group Corp., have agreed to invest an additional $125 million in Vivint. 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.

Earnout:

Current Vivint equity holders will be entitled to an earn-out of 25 million shares split equally if share price targets of $12.50 and $15.00 are achieved, subject to following vesting conditions and performance criteria:

    • 50% of founder shares will vest immediately at closing
    • 25% of remaining Founder shares will vest if share price target of $12.50 is achieved and remaining 25% of Founder shares will vest if share price target of $15.00 is achieved. Unvested Founder shares shall be subject to forfeiture if such conditions are not met by the fifth anniversary of closing
    • 50% of Founder warrants will vest if share price target of $12.50 is achieved and remaining 50% of Founder warrants will vest if share price target of $15.00 is achieved. Unvested Founder warrants shall be subject to forfeiture if such conditions are not met by the fifth anniversary of closing

Notable Conditions to Closing

  • Stockholders of Common Stock having requested redemption for fewer than 10,350,000 shares in the aggregate of Common Stock,

Notable Conditions to Termination

  • By either Mosaic or Vivint Smart Home if the transactions are not consummated on or before January 22, 2020 (or April 23, 2020, if stockholders of Common Stock have approved the deadline for Mosaic to consummate its initial Business Combination)
  • In the event the Merger Agreement is terminated, then Mosaic shall be entitled to receive a termination fee in the amount of $81,060,000.

SUBSEQUENT EVENTS

On December 19, 2019, Mosaic announced the deal had been re-struck.

  • The Amendment reduces the initial EV of Vivint to ~$4.1 billion
    • implying an estimated 2020 Adjusted EBITDA multiple of ~7.75x.
  • Affiliates of Fortress Investment Group LLC agreed to invest up to an additional $50 million through open market purchases of commons or directly from Mosaic, prior to the closing of the merger.
    • This investment is in addition to the previously announced $125 million by Fortress affiliates and to the pre-existing investments in Mosaic held by Fortress affiliates.
  • An investor who is investing in Vivint pursuant to forward purchase commitments obtained in connection with Mosaic’s IPO has agreed to invest an additional $50 million in Vivint in the common stock prior to the closing of the merger.
    • As consideration for the additional investment, 25% of Mosaic Sponsor Shares and Private Placement Warrants will be forfeited and Mosaic will issue to the Forward Purchaser an equal number of shares of Mosaic Class A common stock and warrants concurrently with the consummation of the merger. 
    • Mosaic had 8,625,000 Sponsor Shares and 5,933,333 at IPO, so that means they’ll be forfeiting 2,156,250 shares and 1,483,333 warrants and issuing a like amount to the Forward Purchaser, for an effective purchase price of $6.98.
  • Pro forma net leverage reduced from 5.2x to 3.9x LTM 9/30/2019 Covenant Adjusted EBITDA
    • Substantially all net proceeds expected to be used to repay debt, assuming no redemptions by Mosaic’s public stockholders.

Based on those assumptions, in total, there will be~ $790 million of net cash proceeds at closing, including:

  • (i) the $150 million of forward purchase commitments obtained in connection with Mosaic’s IPO (including a Fortress affiliate),
  • (ii) the previously announced $125 million investment in Vivint by Fortress affiliates,
  • (iii) the previously announced $100 million investment in Vivint by Blackstone,
  • (iv) the additional investment of up to $50 million by Fortress affiliates and
  • (v) the additional $50 million investment from a forward purchaser. 

Further changes include:

  • An additional 12.5 million of Class A common shares to be issued to Vivint Smart Home’s holders upon achievement of a $17.50 earnout threshold
  • A decrease in the termination fee to $32.4 million.

1/16/20 – Closing Condition Waiver

  • Mosaic Acquisition Corp. and Vivint Smart Home, Inc. announced that, in connection with their pending transaction, Vivint has waived the closing condition relating to the number of redemptions of public shares of Mosaic Class A common stock (“Mosaic common stock”). Under the terms of the merger agreement, it is a condition to Vivint’s obligation to consummate the merger that the number of redemptions of Mosaic common stock under the redemption offer made by Mosaic in connection with the merger does not exceed 10,350,000 shares of Mosaic common stock.

mosaic supplement trans summary 1

mosaic supplement trans summary 2

 

 

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.

 

MOSAIC ACQUISITION CORP. MANAGEMENT & BOARD

Executive Officers

David M. Maura, 44
Chairman, President, CEO and Director

Mr. Maura has served as the Executive Chairman of Spectrum since January 20, 2016. Prior to such appointment, Mr. Maura served as Chairman of the board of directors since July 2011 and served as interim Chairman of the Board and as one of Spectrum’s directors since June 2010. Mr. Maura was a Managing Director and the Executive Vice President of Investments at HRG from October 2011 until November 2016, and has been a member of HRG’s board of directors since May 2011. Mr. Maura previously served as a Vice President and Director of Investments of Harbinger from 2006 until 2012, where he was responsible for investments in consumer products, agriculture and retail sectors. Prior to joining Harbinger in 2006, Mr. Maura was a Managing Director and Senior Research Analyst at First Albany Capital, where he focused on distressed debt and special situations, primarily in the consumer products and retail sectors. Prior to First Albany, Mr. Maura was a Director and Senior High Yield Research Analyst in Global High Yield Research at Merrill Lynch & Co. Mr. Maura was a Vice President and Senior Analyst in the High Yield Group at Wachovia Securities, where he covered various consumer product, service, and retail companies. Mr. Maura began his career at ZPR Investment Management as a Financial Analyst. During the past five years, Mr. Maura has served on the board of directors of Ferrous Resources, Ltd., Russell Hobbs (formerly Salton, Inc.), Applica, Inc., and HRG. Mr. Maura received a B.S. in Business Administration from Stetson University and is a CFA charterholder.

William H. Mitchell, 60
CFO

Mr. Mitchell previously served as the Chief Financial Officer of companies including Backcountry.com, LLC from 2014 to 2016, Audible, Inc. from 2006 to 2013, Viewpoint Corporation from 2003 to 2006 and Maxworldwide, Inc. from 2002 to 2003. Mr. Mitchell was a member of the Interactive Advertising Bureau CFO Council and was a director of the Broadcast Financial Management Association. He is a past Chairman of the National Telecommunications Cooperative Association Accounting Committee. Mr. Mitchell graduated with an A.B. from Dartmouth College and an MS/M.B.A. degree from Northeastern University and became a Certified Public Accountant in 1982. Mr. Mitchell’s extensive experience as an officer of many different companies, particularly as a Chief Financial Officer, qualifies him to serve as our Chief Financial Officer.

Ed Albert, 46
COO

Mr. Albert is a Managing Director of the Credit Funds Business at Fortress focused on structured equity and lending.  Mr. Albert left Fortress in 2009 to successfully head the NY special situations business at Macquarie Bank USA and returned to Fortress in 2011.  Prior to joining Fortress in 2007, Mr. Albert was a Managing Director at Milestone Capital and a Director with Giuliani Capital Advisors (formerly Ernst & Young Corporate Finance) acting as an advisor to companies, bondholders, lenders and creditors.  Mr. Albert began his career working for the CFO of Marriott International in the Company’s Financial Planning and Analysis Group. Mr. Albert received an MBA in finance from the University of Maryland at College Park in 1997, and is a Chartered Financial Analyst.

Board of Directors

Eugene I. Davis, 62
Director

Mr. Davis is Chairman and Chief Executive Officer of PIRINATE Consulting Group, LLC, or PIRINATE, a privately held consulting firm specializing in turnaround management, merger and acquisition consulting, and hostile and friendly takeovers, proxy contests, and strategic planning advisory services for domestic and international public and private business entities. Since forming PIRINATE in 1997, Mr. Davis has advised, managed, sold, liquidated and served as a chief executive officer, chief restructuring officer, director, committee chairman or chairman of a number of businesses operating in diverse sectors. From 1990 to 1997, Mr. Davis served as President, Vice Chairman, and Director of Emerson Radio Corporation and from 1996 to 1997 he served as Chief Executive Officer and Vice Chairman of Sport Supply Group, Inc. He began his career as an attorney and international negotiator with Exxon Corporation and Standard Oil Company (Indiana) and was in private practice from 1984 to 1998. Mr. Davis serves as a director and chairman of the board for U.S. Concrete, Inc. and Atlas Iron Limited. In addition, Mr. Davis serves as a director of Verso Corporation, Titan Energy, LLC, as well as certain non-SEC reporting companies. Mr. Davis was previously a director of the following public companies: Atlas Air Worldwide Holdings, Inc., The Cash Store Financial Services, Inc., Dex One Corp., Global Power Equipment Group, Inc., Goodrich Petroleum Corp., Great Elm Capital Corporation, GSI Group, Inc., Hercules Offshore, Inc., HRG, Knology, Inc., SeraCare Life Sciences, Inc., Spansion, Inc. and Spectrum. Mr. Davis’ prior experience also includes having served on the board of directors of each of ALST Casino Holdco, LLC and Trump Entertainment Resorts, Inc. Mr. Davis holds a bachelor’s degree from Columbia College, a master of international affairs degree (MIA) in international law and organization from the School of International Affairs of Columbia University, and a Juris Doctorate from Columbia University School of Law.

Tyler S. Kolarik, 36
Director

Mr. Kolarik served as Vice President, Investments at HRG from October 2011 until December 2016. Mr. Kolarik previously served as an Associate and Director of Investments of Harbinger from 2007 until 2011, where he was responsible for investments in the consumer products, agriculture and retail sectors. Prior to joining Harbinger in 2007, Mr. Kolarik was a Summer Analyst at Goldman Sachs, where he interned with the Financial Sponsors Group. Mr. Kolarik received a B.A. in Psychology, cum laude, from Harvard University.

Andrew A. McKnight, 39
Director

Mr. McKnight is a managing director, serving on the investment committee for the Credit Funds and co-heads the Corporate Debt and Securities Group at Fortress. Mr. McKnight is also a member of the Management Committee of Fortress. Prior to joining Fortress in February 2005, Mr. McKnight was the trader for Fir Tree Partners where he was responsible for analyzing and trading high yield and convertible bonds, bank debt, derivatives and equities for the $2.3 billion value-based hedge fund. Prior to Fir Tree, Mr. McKnight worked on Goldman, Sachs & Co.’s distressed bank debt trading desk. Mr. McKnight received a B.A. in Economics from the University of Virginia.

Joshua A. Pack, 43
Director

Mr. Pack is a Managing Director, serving on the investment committee for the Credit Funds and co-heads the Direct Lending, Structured Equity and Net Lease Groups at Fortress. Mr. Pack is also a member of the Management Committee of Fortress. Since joining Fortress in 2002, Mr. Pack has invested in more than $10 billion in corporate middle market debt and structured credit transactions with an emphasis towards media and entertainment, restaurants and retail and broadcasting and wireless spectrum. He has invested in a number of distressed situations in real estate and corporate debt as well as net lease real estate assets consisting of more than 2,000 individual properties. Prior to joining Fortress, Mr. Pack was a Vice President with Wells Fargo & Co. in the capital markets group where he managed a team of investment professionals originating and underwriting senior loan transactions. Before that, Mr. Pack was a Vice President with American Commercial Capital, an independent specialty finance company focused on corporate and real estate lending to middle market businesses. Mr. Pack attended the United States Air Force Academy and received a B.A. in Economics from California State University, San Marcos.












 



ByRoman Developer