Walmart confirms $2.3 billion Vizio deal; Walmart Connect to benefit

After a week of speculation, Walmart on Tuesday (Feb. 20) confirmed it has agreed to acquire television/media brand Vizio for $2.3 billion. The offer is $11.50 per share in cash and Vizio’s board of directors unanimously approved the planned deal.

The deal for the Irvine, Calif.-based company is expected to be completed this year with a short-term dilutive impact on earnings but long-term growth overall for its advertising business Walmart Connect.

If the deal goes through, Walmart would command more than one-fifth of the television market in the U.S. between Vizio and its existing Onn in-house brand, which is powered by Roku’s operating system, according to Statista. It is unclear if that will change once the merger is complete. Almost 70% of Vizio’s TVs are already sold at Walmart, according to the company’s regulatory filings. The acquisition would also give Walmart access to Vizio’s user base of nearly 18 million active users, ad viewership data and potentially the ability to track purchases of those ad views to products sold in Walmart stores.

The retailer said it will use cash and debt to finance the deal should it pass regulatory scrutiny. Walmart said the acquisition would enable it to connect with customers in new ways including innovative television and in-home entertainment and media experiences. It would also create new opportunities to help advertisers connect with consumers, especially through Walmart Connect.

Walmart said the deal should further accelerate its media business in the U.S., bringing together Vizio’s advertising solutions business with Walmart’s reach and capabilities. The benefits would be further strengthened by the growth of connected TV platforms and Walmart’s industry-leading TV panel sales.

“We believe Vizio’s customer-centric operating system provides great viewing experiences at attractive price points. We also believe it enables a profitable advertising business that is rapidly scaling. … We believe the combination of these two businesses would be impactful as we redefine the intersection of retail and entertainment,” said Seth Dallaire, executive vice president and chief revenue officer, Walmart U.S.

The growing device ecosystem and smart TV operating system of Vizio’s SmartCast have garnered more than 18 million active accounts, up 400% since 2018, the retailer noted. Building on this foundation, Vizio created an advertising business that has scaled to more than 500 direct advertiser relationships. The SmartCast ad platform now accounts for the majority of the company’s gross profits and the television manufacturing business continues to struggle.

Walmart said Walmart Connect grew 30% last year with revenue of $3.4 billion. Vizio reported net income of $259 million through the first nine months of this fiscal year. The company also lost $1.3 million from its television and other device sales in the same period. In the most recent third quarter, Vizio reported its platform/ads business was up 22% to $159 million from the prior-year period.

Scott Benedict, partner with McMillan Doolittle and a former electronics buyer at Walmart and Sam’s Club, said the deal makes sense as the Walmart Connect angle is innovative and compelling to advertisers. He said Vizio started doing business with Walmart exclusively for flat panel televisions in the early 2000s. He said the company cultures are similar at the core as each one sought to provide high-quality products at lower prices than competitors. Walmart lost its exclusivity with Vizio who began to sell to competitors like Best Buy and Costco. He suspects once Vizio is acquired, Walmart will be the only one offering Vizio-branded products. He said benefits to Walmart Connect are more compelling than the loss of a couple of retail customers for Vizio.

The Walmart Vizio deal comes as competitor Roku has a 25% share of the connected TV market, based on smart TV operating systems in use, according to Parks Associates. Amazon makes up 17% of the market with its Fire TV operating system and Vizio’s operating system controls 8% of the market.

“Connected TVs are a lucrative ad revenue channel for streaming companies because many of these devices come with built-in ad-supported streaming services like Netflix and Disney+. The Walmart/Vizio deal underscores the massive opportunity for the connected TV industry to drive ad dollars away from traditional linear television to connected TV,” noted Alicia Reese, an analyst with Wedbush Securities.