Minneapolis, Minnesota - Sleep Comfort Corp, a major bed retailer, is to sell 50 million shares of its common stock to Sterling Partners, a leading US-based private equity firm, at $0.70 per share, at a total value of $35 million.
The deal will give Sterling a 52.2 percent ownership in the company, subject to shareholder approval and customary closing conditions.
The agreement "contemplates" the execution of an amended credit agreement with the company's existing lenders, which would provide a maximum availability of $70 million and extend the maturity from June 2010 to December 2012. The company said the combination of the equity infusion and amended credit agreement would provide longer-term financial flexibility.
Under the agreement, Sleep Comfort will cut its board of directors to nine members and appoint five people designated by Sterling. "The proposed investment by Sterling Partners meets the board's objectives of improving the company's financial flexibility, securing a longer-term credit agreement with our bank syndicate, and finding an investment partner who recognises the long-term potential of Select Comfort," said Erv Shames, chairman of Select's board of directors, in a company statement.
Established in 1987, Select Comfort recorded first quarter (Q1) sales figures of $139.6 million for the period ending 4 April, 2009, a drop of 17 percent compared to Q1 2008. However, the company improved operating income by $11.8 million compared to Q1 2008, and recorded a net loss of $2.7 million compared to $7.1 million in Q1 2008.
"During the quarter, we achieved our goals of significantly improving operating performance and generating positive cash flow, despite continued difficult economic conditions and a weak sales environment," said Bill McLaughlin, president and ceo, Select Comfort Corporation. McLaughlin said the year-on-year improvement reflects the first steps of successfully implementing key priorities, which include more closely aligning costs with anticipated sales, re-igniting the Sleep Number brand and preserving cash.
Sleep Comfort was founded by an inventor, and former innerspring mattress maker, who created a mattress that uses air chamber technology and personalised adjustability to improve comfort and ease back pain. The company, which employs 2500 staff in the US and Germany, manufacturers nine models of its Sleep Number Bed, including mattresses made from polyurethane viscoelastic memory foam. (RD)