Steinhoff Heads to U.S. With $2.4 Billion Mattress Firm Buy

  • Acquisition will create world’s largest bed retailer
  • Mattress Firm shares more than double in New York trading

Steinhoff International Holdings NV’s European acquisition spree swept across the Atlantic as the South African retailer agreed to buy Mattress Firm Holding Corp. for about $2.4 billion, sending the U.S. company’s shares soaring.

The deal takes Steinhoff into America for the first time, giving it about 25 percent of the country’s retail market for specialty mattresses, according to RBC Europe. The enlarged company will be the world’s largest bed retailer, including chains such as France’s Conforama and Britain’s Bensons for Beds.

To gain the 3,500-store business, Steinhoff is paying more than double Mattress Firm’s last closing stock price, a valuation that may “raise some eyebrows,” according to Exane BNP Paribas analysts. Mattress Firm shares rose 114 percent to $63.70 in early New York trading, erasing a 52 percent drop in the year through Friday.

The price “leaves investors needing to believe in Steinhoff’s ability to improve organic performance -- something they have a good track record of through previous M&A,” Exane analyst Graham Renwick said in a note.

By targeting Mattress Firm, Steinhoff is gaining the only U.S. mattress manufacturer with a nationwide supply chain. The acquisition will expand the company’s footing in a product category that’s growing at about 5 percent a year, according to RBC. The takeover also serves to meet Steinhoff’s ambition of lessening its exposure to Africa.

About 20 percent of company revenue will come from the U.S., with Europe contributing 44 percent and Africa 27 percent, RBC estimates.

Steinhoff offered $64 a share in cash, compared with Friday’s $29.74 closing price for Houston-based Mattress Firm. Steinhoff said it intends to finance the deal through a combination of bank and bridge loans.

Steinhoff shares rose 1.7 percent to 5.89 euros at 3:40 p.m. in Frankfurt, giving the company a market value of 23.1 billion euros ($25.6 billion).

“This transaction will allow Steinhoff to not only enter the U.S. market with an industry leading partner and a national supply chain, but it will also expand Steinhoff’s global market reach in the core product category of mattresses,” Markus Jooste, Steinhoff’s chief executive officer, said in the statement.

Mattress Firm announced Nov. 30 that it had agreed to buy rival Sleepy’s for $780 million, combining the two largest mattress sellers in the U.S. into a network of 3,500 stores and 80 distribution centers across 48 states. The deal was completed in February.

The company shuffled chief executives in March as it lowered its sales forecast for the year. Ken Murphy was promoted to the CEO post, replacing Steve Stagner, who remained as Mattress Firm’s chairman.

Steinhoff, which has 2,300 stores, last month announced a deal to buy 900-store U.K. discount chain Poundland Group Plc for 597 million pounds ($794 million).

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