Posts Tagged ‘posturepedic mattress’

Simmons, Serta debt will top $1B even after trim

Thursday, December 3rd, 2009

The soon-to-be parent company of bedding majors Simmons and Serta will have more than $1 billion in long-term debt once Simmons emerges from bankruptcy protection, according to documents filed in U.S. Bankruptcy Court here.

Simmons currently has about $1 billion of debt of its own, but more than half will be wiped out under the proposed bankruptcy reorganization.

The documents say Simmons and Serta will be operated as separate entities. However, several key financial measures are combined because the new parent, an affiliate of Serta owners Ares Capital and the Ontario Teachers’ Pension Fund, is projecting significant cost savings from the new ownership structure.

The documents were filed as part of Simmons’ prepackaged Chapter 11 reorganization in anticipation of Simmons being acquired by Serta’s owners.

A footnote to the statement projects Simmons’ sales in 2010 at $950 million to $960 million. A separate document projects Serta Holding’s 2010 sales at $797 million. That would put the combined companies’ sales at $1.75 billion to $1.76 billion next year — an increase of 5.8% to 6.4% from 2009.

As a standalone company, Simmons sales are projected to be $903.1 million for this year, down 12.2% from 2008.

Serta Holdings’ projected sales for this year are $742.3 million, down 8.6% from 2008. Serta Holdings generates more than 80% of the sales of the Serta brand nationally.

The financial projections, which assume the acquisition will be closed on March 15, show the two companies with approximately $1.048 billion in long-term debt on that date. Of that total, Serta’s debt is projected at $599.6 million and Simmons is forecast at $448 million.

The court documents show Serta had $624.4 million in debt as of Sept. 30, and project that figure will fall to $613.5 million by the end of this year.

According to the projections, debt for the new parent company would fall to $1.005 billion by the end of 2010. From there, it would fall steadily to $815.8 million by the end of 2013.

During that same period, the parent company’s cash position would rise steadily from $182 million at the end of 2010 to $443.4 million by the end of 2013, the projections show.


Simmons sighs in relief as deal announced

Thursday, December 3rd, 2009

So now we know that those Serta-Simmons rumors were true, sort of.

The purchase agreement announced today between Simmons and an investor group led by Ares Management and the Ontario Teachers’ Pension Plan, the owners of Serta, would dramatically change the face of the bedding landscape, sort of.

It will create a new No. 1 in the mattress world: Simmons plus Serta is almost $2 billion in sales, compared to $1.2 billion for Sealy, the way things stood at the end of last year.

But I’m sure you didn’t miss the point that Serta’s owners made about intending to operate Simmons and Serta as separate and distinct entities. There is more than a little skepticism about that claim in industry circles. Time, of course, will tell.

It’s also worth noting that the deal has not closed, and that the Federal Trade Commission’s review of the implications of the proposed transaction continues. Some believe the FTC will squash the deal. Again, time will tell.

For now, Simmons has to be pleased that it is finally moving toward the conclusion of a process that has dragged on for month after agonizing month. Uncertainty in business is usually not a good thing. Simmons took a big step forward in announcing the purchase agreement.