Jessup, Maryland - The US bankruptcy court has approved the sale of Classic Sleep Products to Classic Brands llc -- formed by the current management team and the company's Chinese manufacturing partner.
Under the terms of the sale, only 25 days after the company filed for Chapter 11 protection, Classic's current management, led by ceo Mike Zippelli will increase its majority ownership. Funding is to be provided by JMX Capital Partners and Classic's senior lender, CIT Commercial Services. JMX is partially owned by Xiong Yu of Delandis Trading Corp. of Fujian, China, who is Classic's long-time manufacturing partner. Together, the parties are contributing $10 million to recapitalise the company, said Classic's 2 Feb announcement.
Calling this arrangement "a new paradigm in the mattress industry," Zipelli said it combines "superior US design, engineering, sales, logistics and marketing; and world-class, state-of-the-art Chinese manufacturing."
Zipelli added that the infusion of capital will "strengthen our current business and position the company for dynamic future growth."
According to the Classic ceo, this deal is different to other Chinese-US partnerships in that Classic is using "all its manufacturing specifications and quality controls to produce its value-priced line-up in China." Other bedding firms "are just importing beds produced by Chinese manufacturers."
"This is not a license deal, but rather our own people working in China to produce a better made value-priced mattress," he added.
Classic Brands and Delandis have already started to build a new mattress plant in Fujian, China to meet increased customer demand. Construction should be completed in 2011.
Zippelli said he became convinced a while ago that Chinese manufactures such as Delandis, who were building state-of-the-art manufacturing facilities with the latest equipment and quality control procedures, had a real competitive advantage over US producers, especially for quality memory foam mattresses.
"When you look at the traditional problems a Chinese manufacturer has in entering the US market, the lack of a sales force, communication issues, poor customer service and logistics, this was something our domestic team excelled at. Meanwhile, they could make a fantastic product well below our domestic cost. Together, we have become quite a team," he said.
For Xiong Yu, one of the partners in JMX, commented that, "Our relationship with Classic has enabled us to better understand and appreciate the US home furnishings market. Working with Mike and his team, we were able to foresee many of the problems other Chinese manufacturers have had in terms of navigating the US market and it has made our relationship very successful for both parties," said Yu.