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Larry Thomas

Mattress Firm makes hay with IPO

Raises $95 million

Mattress Firm president Steve StagnerMattress Firm president Steve Stagner, right, celebrates the retailer’s IPO in New York’s Times Square with Bob McCooey, senior vice president of new listings for Nasdaq.
HOUSTON - Bedding retailer Mattress Firm raised more than $95 million from an initial public stock offering on the Nasdaq Global Select Market.
     The stock, which started trading Nov. 18, jumped more than 15% above its offering price of $19 per share shortly after trading began.
     Steve Stagner, the Houston-based retailer's president and CEO, said the IPO was the culmination of several years' work that will significantly reduce debt and enable the company to continue on its rapid growth track.
     "The whole process was very humbling," he said of IPO. "But the encouraging thing was that our story was so well received in the investment community."
     Mattress Firm has about 800 stores, including nearly 300 that have been added since 2008. Going forward, Stagner said about two-thirds of its new stores will be opened in existing markets with the remainder in new markets.
     "This has been a very exciting time for us," he said. "I think (going public) is great for the industry."
     To celebrate the IPO, Stagner was joined at Nasdaq's trading center by more than two dozen Mattress Firm executives and managers. The group sounded the closing bell when trading ended on its first day as a public company.
     The offering of 5.56 million shares will generate about $95.2 million for the Top 100 retailer, after underwriting discounts and other fees are deducted.
     According to documents filed with the Securities and Exchange Commission, the bulk of the proceeds will be used to pay off a 2009 loan that carries an interest rate of 16%. As of Aug. 2, the loan had a balance of $80.9 million.
     An additional $4.4 million could be raised if the IPO underwriters exercise their option to purchase an additional 833,333 shares to cover over-allotments. The additional money would be used to pay principal and interest on outstanding payment-in-kind (PIK) notes that carry a 12% interest rate, the company said.
     Assuming all the over-allotments are exercised, the retailer's debt will shrink to about $229.4 million once the offering is completed. It stood at $406.9 million prior to the IPO.
     As of Nov. 1, the company had 757 company-owned and franchised stores.
     Since then, Mattress Firm has acquired 55 stores in the Atlanta, St. Louis and Minneapolis markets from fellow Top 100 retailer Mattress Giant. That deal was valued at about $8 million and is subject to inventory and other customary adjustments.
     Stagner said the newly acquired stores will be renamed and converted to the Mattress Firm format over the next several weeks.

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