- Combined Business Will Operate
Approximately 2,000 Mattress Specialty Retail Stores and 70
Distribution Centers Across 40 States –
- Expected Mid-Single Digit EPS Percentage
Accretion, on GAAP Basis Before One-Time Costs, in the First
Full Year After Closing -
- Estimated $20 Million in Annual Run Rate
Synergies by Fiscal 2017 -
- Creates Opportunity for Expanded Store
Location Runway in United States -
Mattress Firm Holding Corp. (the “Company”) (NASDAQ:MFRM), the
leading specialty retailer of mattresses and related products and
accessories in the United States today announced that it has
entered into an agreement to acquire all of the outstanding equity
interests in The Sleep Train, Inc., the leading West Coast based
bedding specialty retailer, for an aggregate purchase price of $425
million, subject to working capital and other customary
adjustments. As further consideration, the Company has agreed to
assume certain additional liabilities totaling approximately $15
million. Sleep Train operates approximately 310 specialty mattress
retail stores located in California, Oregon, Washington, Idaho,
Nevada and Hawaii, and reported net sales of $471 million for the
2013 fiscal year, according to Furniture Today.
The closing of the acquisition, which is conditioned on the
prior satisfaction of customary closing conditions and is subject
to expiration or termination of the applicable waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act and other
regulatory approvals, is expected to occur by the end of the fourth
fiscal quarter of 2014. The purchase price payable to the selling
shareholders will be reduced by certain payment obligations of
Sleep Train, including the repayment of certain indebtedness of
Sleep Train. Ten percent of the adjusted purchase price is payable
to the shareholders of Sleep Train in shares of common stock, par
value $0.01 per share, of the Company, having an aggregate
equivalent value, as calculated in accordance with the purchase
agreement. The remainder of the consideration payable to the
shareholders of Sleep Train will consist of cash and, as noted
above, the Company will assume certain additional liabilities of
Sleep Train totaling approximately $15 million. The Company expects
to fund the cash requirements of the closing of the acquisition
with cash reserves and the proceeds from the issuance of senior
secured debt. The Company expects to receive future annual cash
income tax benefits of approximately $11 million over the next 15
years from deductible tax basis goodwill generated from the
transaction, subject to the Company’s ability to generate future
taxable income. The transaction has been unanimously approved by
the Boards of Directors of both companies and the trustee of The
Sleep Train, Inc. Employee Stock Ownership Plan.
The Company plans to continue to operate under both the Mattress
Firm and Sleep Train’s family of brands and will maintain a West
Coast corporate headquarters near Sacramento, California.
“This unique and transformational opportunity will meaningfully
enhance Mattress Firm’s position within the specialty retail
bedding industry,” stated Steve Stagner, Mattress Firm’s president
and chief executive officer. “The acquisition of Sleep Train will
establish Mattress Firm as the first border to border, coast to
coast multi-brand mattress specialty retailer in the United States,
with pro forma sales approaching $2 billion a year. It allows us to
share best practices and integrate two industry leading management
teams, positioning Mattress Firm for accelerated growth. Just as
importantly, these two companies are ideal partners, aligned on our
passion for culture and emphasis on core values. Not only will our
employees and shareholders benefit from this union, but the
combination of Mattress Firm’s proven relative market share model
and strong operating efficiencies with Sleep Train’s exceptional
ability to deliver robust sales per store is expected to deliver
significant synergies and provide our customers with a greater
level of selection, service and convenience.”
Stagner added, “We and Sleep Train are excited about the
numerous opportunities this acquisition will create for our
combined 5,000 employees as well as our vendors, business partners
and shareholders. Upon closing, Dale Carlsen, the chief executive
officer of Sleep Train, will become president and chief strategy
officer of the Company and will join the Mattress Firm Board of
Directors as Vice Chairman. Rob Killgore, chief operating officer
of Sleep Train, will become co-chief operating officer of the
Company with current Mattress Firm chief operating officer, Ken
Murphy.”
Carlsen commented: “Since 1985, Sleep Train has provided our
customers with a good night’s sleep and been a strong partner in
our communities. Mattress Firm, through Steve’s leadership, has
shown their commitment to their customers and their communities as
well. I look forward to bringing our two teams together for the
benefit of our customers, our employees and the communities we
serve. Today’s announcement represents the hard work of the Sleep
Train employee owners who now together with their Mattress Firm
peers will move to transform the bedding retail industry. This
compelling, value-enhancing transaction would not have been
possible without both companies being so aligned in our culture and
our visions. The combination will place our talented team members
onto a national platform with enhanced growth and development
opportunities. I am excited about our future with the Mattress Firm
team and look forward to completing the transaction so that we can
realize the benefits for all of our stakeholders.”
Compelling Strategic Rationale
- Expands footprint into the West
Coast, including key strategic markets
- Adds over 310 retail store locations in
major markets in California, Washington, Oregon, Nevada, Idaho and
Hawaii from a leading market share player with limited
overlap.
- Provides customers with great value,
convenience and choice.
- Fortifies Mattress Firm as the
leading mattress specialty retailer in the United States
- Pro forma sales approaching $2 billion
annually and total enterprise locations exceeding 2,000 retail
store units.
- Generates significant synergistic
opportunities
- Over $20 million of identifiable cost
and revenue synergy potential by the third year after closing.
- Creates opportunity to begin
leveraging national scale benefits
- Allows for enhanced nationwide delivery
and distribution, advertising efficiencies and exclusive
partnership opportunities.
- Adds high-volume, established
locations with a strong and experienced leadership team
- 29 year history of well-positioned,
long-term leases in “hard to enter” trade areas.
- Immediate scale with a sustained and
profitable multi-brand organization.
- Experienced and disciplined culture
that is highly aligned with Mattress Firm.
- Enhances financial performance and
improves growth prospects
- Estimated to achieve mid-single digit
earnings per diluted share (EPS) percentage accretion, on a
generally accepted accounting principles basis before one-time
costs, in the first full year after closing.
- Combined business is anticipated to
generate significant free cash flow.
- Establishes a foundation to execute on
our proven relative market share model by opening additional stores
in West Coast markets to achieve store penetration levels
commensurate with existing Mattress Firm markets.
Barclays, Inc. acted as exclusive financial advisor to Mattress
Firm. Norton Rose Fulbright acted as legal counsel to Mattress Firm
in connection with the transaction. Prairie Capital Advisors, Inc.
provided a fairness opinion to the trustee of The Sleep Train, Inc.
Employee Stock Ownership Plan in connection with the transaction.
Shartsis Friese LLP acted as legal counsel to Sleep Train in
connection with the transaction.
Forward-Looking Statements
Certain statements contained in this press release are not based
on historical fact and are “forward-looking statements” within the
meaning of applicable federal securities laws and regulations. In
many cases, you can identify forward-looking statements by
terminology such as “may,” “would,” “should,” “could,” “forecast,”
“feel,” “project,” “expect,” “plan,” “anticipate,” “believe,”
“estimate,” “predict,” “intend,” “potential,” “continue” or the
negative of these terms or other comparable terminology; however,
not all forward-looking statements contain these identifying words.
The forward-looking statements contained in this press release,
such as those relating to our net sales, EPS and net store unit
change for fiscal year 2014 and any anticipated effects of the
pending acquisition, are subject to various risks and
uncertainties, including but not limited to downturns in the
economy; reduction in discretionary spending by consumers; our
ability to execute our key business strategies and advance our
market-level profitability; our ability to profitably open and
operate new stores and capture additional market share; our
relationship with our primary mattress suppliers; our dependence on
a few key employees; the possible impairment of our goodwill or
other acquired intangible assets; the effect of our planned growth
and the integration of our acquisitions on our business
infrastructure; the impact of seasonality on our financial results
and comparable-store sales; our ability to raise adequate capital
to support our expansion strategy; our success in pursuing and
completing strategic acquisitions; the effectiveness and efficiency
of our advertising expenditures; our success in keeping warranty
claims and comfort exchange return rates within acceptable levels;
our ability to deliver our products in a timely manner; our status
as a holding company with no business operations; our ability to
anticipate consumer trends; risks related to our controlling
stockholder, J.W. Childs Associates, L.P.; heightened competition;
changes in applicable regulations; risks related to our franchises,
including our lack of control over their operation and our
liabilities if they default on note or lease obligations; risks
related to our stock and other factors set forth under “Risk
Factors” in our Annual Report on Form 10-K for the fiscal year
ended January 28, 2014 filed with the Securities and Exchange
Commission (“SEC”) on March 27, 2014 and our other SEC filings.
Forward-looking statements relate to future events or our future
financial performance and reflect management’s expectations or
beliefs concerning future events as of the date of this press
release. Actual results of operations may differ materially from
those set forth in any forward-looking statements, and the
inclusion of a projection or forward-looking statement in this
press release should not be regarded as a representation by us that
our plans or objectives will be achieved. We do not undertake to
publicly update or revise any of these forward-looking statements,
whether as a result of new information, future events or
otherwise.
About Mattress Firm
Houston-based Mattress Firm (NASDAQ:MFRM) is a high growth
specialty retailer, recognized as one of the nation's leading
specialty bedding companies, offering a broad selection of both
traditional and specialty mattresses, bedding accessories and
related products from leading manufacturers. With more than 1,500
company-operated and franchised stores across 36
states, Mattress Firm has the largest geographic
footprint in the United States among multi-brand mattress
specialty retailers. Mattress Firm offers customers
comfortable store environments, guarantees on price, comfort and
service, and highly-trained sales professionals. More information
is available at http://www.mattressfirm.com. Mattress Firm's
website is not part of this press release.
About Sleep Train
Rocklin-based Sleep Train is a specialty retailer, recognized as
the West Coast’s leading bedding specialty retailer, offering a
broad selection of both traditional and specialty mattresses,
bedding accessories and related products from leading
manufacturers. With more than 300 company-operated across six
states, Sleep Train has the largest geographic footprint on the
West Coast among multi-brand mattress specialty retailers. Sleep
Train delivers its customers healthier lives, one mattress at a
time, through its service oriented selling approach and strong
community outreach. More information is available at
http://www.sleeptrain.com. Sleep Train’s website is not part of
this press release.
Mattress Firm Holding Corp.Investor Relations:Brad
Cohen, 713-343-3652ir@mattressfirm.comorMedia:Joanna
Singleton, 214-269-4401jsingleton@jacksonspalding.com
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