Walmart and Vizio have announced a deal for Walmart to acquire the TV maker for $11.50 per share in cash, totalling approximately $2.3bn.
Through this acquisition, Walmart aims to expand its reach and serve customers in new ways, particularly in the realm of television and in-home entertainment experiences.
It will also provide opportunities for advertisers to connect with customers on a larger scale. The move is part of Walmart's strategy to expand its advertising business and become a major player in the streaming market.
Vizio’s customer-centric SmartCast Operating System has been a key driver of the company's growth over the last five years. With more than 18 million active accounts and a 400% increase since 2018, Vizio's Smart TV operating system, SmartCast, has become a popular choice for consumers.
The platform enables users to stream content for free by watching ads, and Vizio has built an advertising business around this model.
Vizio’s advertising business, Platform+, now accounts for a majority of the company's gross profit.
Walmart Connect, the retailer's media business, has also seen significant growth, with a 30% increase in financial year 2024. The business offers advertisers the opportunity to reach customers across various channels and touchpoints.
The combination of Walmart Connect and Vizio's technology could be a game-changer in the retail and entertainment industries.
The acquisition of Vizio also aligns with Walmart's efforts to change the composition of its profit streams. The company plans to generate more of its future earnings from selling ads on Walmart properties than from selling everyday essentials such as milk and toilet paper.
This shift in focus could help Walmart fund investments in its core business while also expanding its operating margins.
Walmart's offer price of $11.50 per share represents a premium of 47% to Vizio's closing price of $7.82 as of 12 February 2024.
The acquisition is subject to regulatory approval and other closing conditions, but Vizio’s board of directors has unanimously approved the transaction. Vizio stockholders holding approximately 89% of the voting power have also approved the deal.
Upon completion of the transaction, Vizio’s Class A common stock will no longer be publicly listed.
Walmart plans to finance the acquisition using cash and/or debt, and the transaction is not subject to a financing condition.
The company expects the deal to be slightly dilutive to earnings per share (EPS) in the near term due to transaction-related costs, including talent retention and technology integration. However, the internal rate of return for the transaction is expected to be ahead of Walmart's reported return on investment.
