Frontdoor (FTDR) M&A Announcement summary

Deal rationale and strategic fit

• Acquisition of 2-10 Home Buyers Warranty expands into new home structural warranties, diversifies product offerings, and opens new sales channels.

• Provides access to 2-10's 19,000 builder customers, including 45 of the top home builders, and coverage for about 1 in 5 new homes built in the U.S.

• Enables cross-selling opportunities for home warranties and on-demand services, leveraging complementary offerings.

• Strong cultural fit and management talent at 2-10 expected to enhance integration and future growth.

• Positions the acquirer to benefit from projected growth in new home sales, supported by demographic trends and expected lower interest rates.

Financial terms and conditions

• All-cash transaction valued at $585 million on a cash-free, debt-free basis, subject to minimum working capital and regulatory capital.

• Supported by fully committed bridge facility and cash; permanent financing expected to be primarily new debt.

• 2-10 generated $198 million in revenue and $43 million in adjusted EBITDA (21.7% margin) in 2023.

• Transaction expected to close in Q4 2024, subject to regulatory approval and customary closing conditions.

Synergies and expected cost savings

• Significant revenue and cost synergies anticipated, including cross-selling, operational efficiencies, and best-in-class marketing and sales practices.

• Strengthened financial profile expected to be additive to adjusted EBITDA and free cash flow in 2025.

• On-demand services and new HVAC programs to be marketed across the expanded customer base.