Steinhoff to buy Mattress Firm for $3.8bn

Shares in Mattress Firm looked set for a big bounce on Monday after the company confirmed it has agreed to be bought by South Africa’s Steinhoff International for $64.00 per share in cash.

The US mattress retailer said the price represents a premium of 115% over its closing price of $29.74 on Friday, a total equity value of around $2.4bn and an enterprise value of approximately $3.8bn, including net debt.

The acquisition – which has been unanimously approved by the Mattress Firm board of directors and the management and supervisory boards of Steinhoff – is expected to close around the end of the third quarter.

Mattress Firm will operate as a subsidiary of Steinhoff from Mattress Firm's current headquarters in Houston, Texas. Steve Stagner, executive chairman and chairman of the board of Mattress Firm, and Ken Murphy, president and chief executive of Mattress Firm, will remain in their positions with Stagner also joining Steinhoff's executive committee.

Stagner said: “The Mattress Firm board believes that the transaction provides significant value to our stockholders through the premium to our share price and the immediate liquidity at closing, while giving Mattress Firm an ideal partner with a proven track record in the complete mattress supply chain including the retail and manufacture of mattresses.

“This expertise will complement our diverse selection of products provided by our valuable partners. Steinhoff's management team shares our vision for the growth and expansion of Mattress Firm and, as such, we believe they are the right long-term partner for our customers, employees, suppliers and other stakeholders."

RBC Capital Markets said that while it looks like Steinhoff is paying “a full price” for the company given the 115% premium, it “is paying a strategic premium to allow it to enter the US market with an industry leading partner (Mattress Firm has a 25% market share in US mattress specialty retail compared to the number two Sleep Number which has 8% and several players with 1% or less)”.

“It is also the only US mattress manufacturer with a nationwide supply chain and it will expand Steinhoff's footprint in a relatively defensive product category that is growing at around 5% per year,” RBC added.

Mattress Firm shares were up a whopping 110% to $29.74 in pre-market trade.