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Mattress Firm Amends $200MM ABL in Sleepy’s Acquisition

February 08, 2016, 08:00 AM
Filed Under: Retail

Mattress Firm Holding Corp., the nation's largest specialty mattress retailer, today announced the completion of its acquisition of all of the outstanding equity interests in HMK Mattress Holdings LLC, the holding company of Sleepy's and related entities, for an aggregate purchase price of $780 million, subject to working capital and other customary adjustments. Sleepy's is the nation's second largest specialty mattress retailer, with over 1,050 stores in 17 states in the Northeast, New England, the Mid-Atlantic and Illinois.

The Company expects to generate annual synergies of approximately $40 million by Fiscal 2018. In addition, the Company expects to receive future cash income tax benefits totaling over $11 million annually for more than 10 years from the deductible tax basis goodwill generated from the transaction and from the carryover tax basis of other assets, both subject to the Company's ability to generate future taxable income.

The Company also announced today that it entered into an amended $865 million senior secured credit facility with Barclays Bank PLC, J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Wells Fargo Securities LLC, as joint bookrunning managers and joint lead arrangers. The senior secured credit facility is comprised of (i) an amended asset based revolver of $200 million that includes a sublimit for letters of credit and swingline loans, subject to certain conditions and limits, and (ii) an incremental term loan borrowing of $665 million. The amended asset based revolver will mature on the fifth anniversary of closing, and the incremental term loan will mature along with the Company’s existing term B loan in October 2021.

The Company also closed today on the rollover and sale of an aggregate $63 million of new shares of Mattress Firm common stock, at a price of $35.75 per share. Approximately $38 million of the common stock represented the rollover of equity interests owned by entities associated with Calera Capital Partners and by Adam Blank, president of Sleepy’s. Additionally, entities associated with J.W. Childs Associates purchased $20 million and Steve Stagner, chief executive officer, purchased $5 million of new shares of Mattress Firm common stock.

Barclays acted as exclusive financial advisor to Mattress Firm and provided a fairness opinion to the Company. Norton Rose Fulbright LLP acted as legal counsel to Mattress Firm in connection with the transaction. Morgan Stanley & Co. LLC acted as exclusive financial advisor to Sleepy's. Gibson, Dunn & Crutcher LLP acted as legal counsel to Sleepy's in connection with the transaction.

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