Los Angeles-based Ares Management and Toronto-based Teachers’ Private Capital, the private equity arm of the Ontario Teachers’ Pension Plan, have agreed to acquire National Bedding Co., the primary maker of Serta mattresses.
Terms of the deal were not disclosed, though reportedly the transaction size is between $500 million and $1 billion (€405 million and €810 million). Serta’s two founders and management will continue to hold a minority share in National Bedding following the close of the deal.
Ares and Teachers’ have been minority stakeholders in National Bedding since February 2003 following the mattress company’s purchase of bankrupt Sleepmaster. Ares and Teachers’ had been investors in Sleepmaster’s distressed debt following the company’s bankruptcy filing.
Founded in 1931, Hoffman Estates, Illinois-based Serta is currently the third largest US manufacturer of mattresses in the US and Canada. National Bedding is currently the largest manufacturer of Serta brand mattresses and holds 27 of the 34 exclusive US Serta manufacturing licenses, accounting for approximately 80 percent of all sales under the Serta brand name in the US and Canada.
The mattress industry has long attracted private equity firms due primarily to its high cash-flow and stable earnings. Last year, for instance, Kohlberg Kravis Roberts bought Sealy, the world’s largest manufacturer of mattresses, from a group including Bain Capital, Charlesbank Capital Partners, JP Morgan Partners, CIBC Argosy Merchant Fund and BancBoston Capital, for $1.5 billion (€1.23 billion). Sealy recently filed for an initial public offering. Simmons Co., the second-largest mattress maker in the US, is currently owned by Thomas H. Lee Partners.
Ares Management is an independent investment firm with more than $7 billion of committed capital under management. The firm completes private equity deals through its Ares Corporate Opportunities Fund. Last year, Ares teamed with New York-based JP Morgan Partners in a $110 million (€90.4 million) recapitalisation of entertainment venue company House of Blues.
Teacher’s Private Capital is the principal investment arm of the C$80 billion Ontario Teachers’ Pension Plan. In December of last year it entered into its first ever US deal when it agreed to acquire Alliance Laundry Systems from Boston-based Bain Capital in a $450 million buyout.