Steinhoff Agreed to Buy Mattress Firm for $2.4 Billion, Representing a 115% Premium

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Steinhoff International Holdings NV, a furniture seller located outside Cape Town in South Africa, announced on Sunday that it agreed to buy Mattress Firm Holding Corp (NASDAQ:MFRM), the owner of Sleepy and the largest specialty mattress retailer in the U.S., in a $2.4 billion deal.

In the deal, Steinhoff will pay Mattress Firm $64 per share, representing a 115% premium to the Mattress Firm’s Friday closing price of $29.74 per share. The deal is expected to close in the third quarter of 2016, after which Mattress Firm will be Steinhoff’s subsidiary. Mattress Firm’s headquarter will remain in the current location of Houston. Its current CEO Ken Murphy and executive chairman Steve Stagner will still be in their positions and will join the executive committee of Steinhoff.

The deal between Steinhoff and Mattress Firm made Steinhoff’s first step into the U.S. market, which is part of South African company’s global expansion plan.

“In South Africa and Africa, our market-share is already quite big. Growth potential in our current product category is a bit capped,” Mariza Nel, the director of corporate services at Steinhoff, said in an interview. “We need the market to grow, or we will need to enter into a new product category.”

Steinhoff, the retailing giant in Africa, was called “Africa’s Ikea” but was not that famous outside Africa. Recently, the company began its expansion worldwide. In July, Steinhoff agreed to buy British retailer Poundland Group PLC for $793.77 million. It has also expanded to European countries, such as Germany, Switzerland, Poland and Bulgaria. The deal with Mattress Firm represents its entry into the U.S. market.

Markus Jooste, CEO of Steinhoff, said in a statement that the deal will also “expand Steinhoff’s global market reach in the core product category of mattresses”. Markus added that the brand and specialty of Mattress Firm is “a strong complement to the Steinhoff group retail brand portfolio in the many geographies where the group operates”.

Steve Stagner, executive chairman of Mattress Firm, expressed that the premium to share price and immediate liquidity at closing provide value to their shareholders. Stagner also see Steinhoff as an ideal partner.

Shares of Mattress Firm was up 114.34% to $63.75 per share in the late-afternoon trading Monday.

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