Steinhoff targets US with $4bn deal for Mattress Firm
Steinhoff International, the acquisition-hungry South African discount retailer, is set to break into the US market with a $4bn bid for Mattress Firm Holding, the country’s largest bedding retailer.
Steinhoff and Mattress Firm Holding, which operates 3,500 retail stores across America under the brands Sleepy’s and Mattress Firm, are expected to announce a deal as early as Monday, people briefed on the talks said, although they cautioned that the terms were still being finalised.
The exact terms could not be learnt but the transaction is expected to value the company’s equity at a huge premium and $4bn including debt, the people said.
Shares in Mattress Firm have slumped nearly 52 per cent during the past year, giving the company a market value of $1.12bn as of Friday’s close. It has net debt of nearly $1.5bn.
A deal will give Steinhoff, which already owns European home furnishings retailers Bensons for Beds and Conforama, a significant US operation of franchised and operated stores in 48 states. Neither company immediately responded to requests for comment.
Mattress Firm Holding, based in Houston, announced plans in June to help rejuvenate its weak performance and rebrand all its stores under the Mattress Firm banner after a series of acquisitions, poor results and increased competition from online retailers.
Ecommerce companies led by Amazon continue to disrupt the performance of traditional brick-and-mortar stores. Ecommerce sales are expected to increase by 13 per cent in 2016, while overall US retail sales are projected to rise by just 2 per cent, according to a report by eMarketer.
Steve Stegner, chief executive of Mattress Firm since 2010, led a number of acquisitions, including the $780m deal for the owner of Sleepy’s last year, before relinquished the position to company insider Ken Murphy in March. Mr Stegner took the roles of executive chairman and chairman.
JW Childs Associates, a mid-market US private equity firm, owns 36.5 per cent of Mattress Firm and is its largest shareholder.
The deal suggests Steinhoff has begun to turn its attention to the US market, after it attempted at least three takeovers in Europe this year.
Its one success came last month, agreeing a £450m deal to buy UK discount chain Poundland after it built a 22 per cent shareholding. Steinhoff was beaten in previous auctions for French retailer Darty and the UK’s Home Retail Group by rival suitors.
Bankers have said that Steinhoff is seeking to strike deals outside its home market to diversify and reduce its exposure to South Africa’s volatile currency. The company’s Frankfurt-listed shares are up 21 per cent since the start of the year, giving it a market valuation of €22.7bn.