Serta, Simmons owner Ares: Big presence but low profile
By David Perry -- Furniture Today, May 3, 2010
LOS ANGELES —
Ares Management is a big private equity investment firm that keeps a low profile.
The company, based here, partnered with the Ontario Teachers' Pension Plan to acquire Serta in 2005 and the two added Simmons to their portfolio earlier this year.
Bennett Rosenthal, senior partner for private equity at Ares and a member of that company's executive committee, reflected on the events that led Serta and Simmons to join the Ares-Ontario portfolio.
Eight years ago, he said, Ares Management made a “small debt investment” in one of Serta's licensees, Sleepmaster, “and after the financial restructuring of Sleepmaster, the acquisition of Serta as well as the recent Simmons transaction, that is how we got to where we are today.”
Rosenthal responded to a wide range of questions in a two-hour interview with Furniture/Today, held at the Ares Management headquarters on the top floor of 2000 Avenue of the Stars in Century City, a part of Los Angeles with a rich history in the entertainment industry.
Creative Artists Agency, the top talent agency in the entertainment business, occupies prime space in 2000 Avenue of the Stars, and the contemporary glass lobby has been seen in scenes of “Entourage,” the popular HBO series. On any given day, Hollywood A-listers can be seen entering or leaving the building. Steven Spielberg, Brad Pitt, George Clooney and Oprah Winfrey head CAA's impressive client list.
Some of Rosenthal's key points:
On what Ares Management and the Ontario Teachers' Pension Plan like about the bedding business: “We've always loved the stable growth, despite what happened last year. We also like the consistent, strong cash flow characteristics that every buyer strives for.”
On what assurances Ares and Ontario can give that Simmons and Serta will be operated as separate and distinct brands: “The companies' actions in the market will speak for themselves.”
On what will happen at Serta and Simmons down the road: “As in the past, any decision regarding changes in the business plan will be made by each management team and in accordance with operating conditions at that given time. We always evaluate what's best for each of our portfolio companies.”
Ares and Ontario have many seasoned businessmen working on their investments, and Rosenthal identified two who he said are resources for the Serta and Simmons management teams. Norman Axelrod and Jim Hirshorn are operating advisors for Ares Management and also have relationships with Ontario Teachers' Pension Plan representatives.
“Norman has many years of being a top-flight retail executive, and therefore brings a strong retailer's perspective,” Rosenthal said. “Jim brings great operational experience and skills in the mattress industry as well as his experience from consulting in other industries.”
Axelrod worked at Bloomingdale's from 1976 until 1988 in various management positions, ending his term there as senior vice president and general merchandise manager. After that he was CEO and chairman of the board of Linens 'n Things until the company was sold in 2006.
Hirshorn has spent about eight years working with the mattress industry. He worked for Bain Capital, which then owned Sealy, and worked with mattress retailers Sleep Country Canada, Mattress Discounters and The Mattress Firm. He also spent four years at Sealy, becoming senior executive vice president of finance, operations and research and development.
Rosenthal said he granted an interview to Furniture/Today in order to talk directly to the bedding industry about the plans Ares and the Ontario Teachers' Pension Plan have for Simmons and Serta.
He declined a request to be photographed by Furniture/Today, saying he did not want to draw attention to himself and preferred to keep the focus on Ares and its investing partner.
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