Sleep Country Canada closes Ariz. deal
By Michael J. Knell -- Furniture Today, March 27, 2006
Toronto — Sleep Country Canada has completed its acquisition of Sleep America, the bedding retailer based in Phoenix and Tucson, Arizona.
"Joining forces with Sleep America represents a low-risk opportunity to assume a leading position in one of the most attractive markets in the United States," said Stephen Gunn, Sleep Country CEO.
"Len and Debbie Gaby, the owner/founders, and their existing management team will continue to drive the success of their business model that is virtually identical to ours," said Gunn. "Sleep America enjoys the same competitive advantages that we do in our markets including strong brand recognition, superior in-store and home delivery service and strong relationships with leading suppliers."
According to Sleep Country Canada, Sleep America has 32 stores in Arizona and had sales in 2005 of US$37.5 million and earnings before interest, taxes, depreciation and amortization of US$3.4 million.
The deal will have an immediate positive effect on Sleep Country earnings, Gunn said. It was funded from cash on hand and new long-term debt of US$10 million.
"The road to the U.S. from Canada is littered with the dead bodies of other Canadian retailers," Gunn said in a conference call with securities analysts. But he said that because Sleep Country Canada and Sleep America have similar approaches, they should be successful.
Current plans call for Sleep America to add at least three stores in 2006. Gunn also said that in the long term, Sleep Country aims to expand Sleep America beyond its present trading area.
Since it was founded in 1994, Sleep Country Canada has taken a regional approach to growth, opening a small number of stores and a supporting distribution center in a particular location and then advertising aggressively to become the dominant player in that market.
In addition to the new U.S. stores, Sleep Country Canada has 116 stores in, five Dormez-Vous units in Montreal. It has no relation to Seattle-based Sleep Country USA.
