Mattress Firm (MFRM) to be acquired by Africa’s Steinhoff for $64/sh

Mattress Firm (MFRM) to be acquired by Steinhoff (SNHFY) for $64 per share.  (8/8/16)

   

Steinhoff International Holdings NV, with headquarters in Johannesburg, announced July 8 that it planned to acquire Houston-based Mattress Firm Holding Corp. for $64.00 per share in cash, or $2.4 billion. The offer was unanimously approved by the boards of both companies and will result in the largest multi-brand mattress retail distribution network in the world.

On Aug. 29, the deal earned U.S. regulatory approval with the early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, according to a Mattress Firm news release. As of this writing, the acquisition is expected to close by the end of the third quarter.

Steinhoff is a leading international retailer that manufactures, sources and sells furniture, household goods and clothing in Europe, Africa and Australasia. Steinhoff also is an automotive retailer in southern Africa. Nicknamed “Africa’s Ikea,” it operates through 6,500 stores under more than 40 retail brands in 30 countries, and employs about 105,000 people. Founded in 1964, the company is traded on the Frankfurt Stock Exchange and Johannesburg Stock Exchange. In 2015, Steinhoff reported $10.97 billion in revenues.

Publicly held Mattress firm operates 3,500 company-owned and franchised stores throughout the contiguous United States. Founded in 1986, it is the largest mattress retailer and sleep-shop chain in the country. Its 2015 sales exceeded $3.5 billion.

According to news reports, Steinhoff’s offer surprised market analysts and industry observers, as it represented a 115% premium on Mattress Firm’s closing stock price of $29.74 per share on Aug. 5.

Steinhoff chair Christo Wiese defended the offer price in a televised Aug. 12 interview with CNBC Africa: “One must be very careful to equate share prices with value. You often find that the share price is way above value—and sometimes you find that the share price is below true value. … We’ve made offers (in the past) and someone came along and offered more, and I think—in a very disciplined manner—we’ve said, ‘Thank you, but no thank you.’ We will only buy at what we consider to be fair value.”

Wiese added, “(Mattress Firm) is in a product area … that is part of Steinhoff’s DNA. Steinhoff knows about mattresses—manufacturing them, distributing them and selling them. … Steinhoff’s ambitions are quite well known to the market. It intends to be a global player; it’s already there. (But) it’s rather difficult to think of oneself as a global player, if you ignore the largest economy in the world.”

In a news release, Markus Jooste, Steinhoff chief executive officer, said he looked forward to welcoming Mattress Firm’s “entrepreneurial management team” and its “employees to be part of one of the world’s leading multi-format retailers.”

Steinhoff is financing the purchase through a combination of bank and bridge loans; the transaction’s closing is not subject to any financing conditions.