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Mattress Firm agrees to buy 54 stores from Mattress Giant

Larry Thomas -- Furniture Today, November 16, 2011

HOUSTON - Specialty retailer Mattress Firm, which will soon complete an initial public stock offering, said it has signed an agreement to buy 54 stores in four states from fellow Top 100 retailer Mattress Giant.
     The acquisition, which is expected to close by the end of November, would give Mattress Firm more than 800 stores in 26 states. It would leave Mattress Giant with about 300 stores in about a dozen states.
     Mattress Firm said the transaction for the stores in Georgia, Missouri, Illinois and Minnesota was an all-cash deal worth $7.9 million, but other details of the acquisition weren't immediately available.
     The pending acquisition was disclosed in an updated registration statement for the IPO that was filed Nov. 7 with the Securities and Exchange Commission.
     According to the registration statement, the retailer intends to issue approximately 5.6 million shares of stock at $17 to $19 per share. Assuming an $18 price per share, the offering would raise about $90 million after underwriting discounts and related expenses.
     Proceeds would be used primarily to pay off a 2009 loan that has an interest rate of 16%. The registration statement said the loan had a principal balance of $84.4 million as of Aug. 1.
     In addition, Mattress Firm said it would pay $1.4 million in accrued management fees and a termination fee to J.W. Childs, the investment firm that currently has a 76.9% stake in the company.
     The investment firm would own 64.4% of Mattress Firm's stock after the IPO is completed.
     If additional proceeds are available, the company said it would repay $4.4 million worth of payment-in-kind (PIK) notes.
     In the registration statement, Mattress Firm also disclosed preliminary financial results for the 13 weeks ended Nov. 1, the third quarter of its fiscal year.
     The company said it expects to report sales of $183.5 million, an increase of $52.8 million, or 40.4%, from the same period in 2010. About $21.5 million of the increase was from stores opened in the previous 12 months, but the increase also included an 18.6% jump in same-store sales.
     The retailer said it expects to report net income of $11 million to $12 million. That's up from net income of $1.9 million in the same period last year.
     Mattress Firm had sales of $331.8 million for the 26 weeks ended Aug. 2. That's an increase of 40.6% from the same period in 2010.

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