A few months after approaching Leggett & Platt with a takeover offer, Somnigroup International announced it would acquire the 140-year-old manufacturer of mattresses and other goods, one of its own suppliers.
The all-stock transaction is valued at about $2.5 billion, has been approved by the boards of both companies and is expected to close by the end of the year. Leggett & Platt's relationships with others in the bedding industry will remain in place after the merger.
The deal continues vertical integration that began early last year when mattress maker Tempur Sealy acquired retailer Mattress Firm for $5 billion, forming the entity now called Somnigroup. Leggett & Platt has been a Somnigroup supplier for some five decades, and last year Somnigroup delivered 7% of its net sales.
Somnigroup CEO Scott Thompson said in a statement that "Leggett & Platt's strong engineering capabilities, diversified end users and cash–generating financial profile meaningfully enhance our global platform.” Leggett & Platt CEO Karl Glassman called Somnigroup “a valued long–standing customer and partner.”
As a combined company, they are expected to run 175 manufacturing facilities across 36 countries with a workforce of more than 36,000. Added together, their net sales last year reached some $11.2 billion, adjusted EBITDA was about $1.7 billion and operating cash flow was $1.1 billion.
They anticipate synergy opportunities, mainly from sourcing, operations and product innovation, with a positive impact of $50 million in adjusted EBITDA over three years, about $10 million of that in the first twelve months post-closing.
Otherwise not a lot will change, at least right away. The plan is to operate Leggett & Platt as a separate unit, maintaining its headquarters in Carthage, Missouri. Glassman will stay on for a time after closing, though the company plans to find a new CEO for the Leggett & Platt business within a year from the closing date.
If and when it does close, Somnigroup’s rivals will end up relying on Somnigroup’s operations to some extent, William Blair analysts Phillip Blee and Olivia Witte said in a Monday client note. The companies’ synergies targets are probably conservative, in no small part due to Leggett’s integrated steel operations, which “provide insulation from steel price volatility, tariffs, and supply-chain risk.”
“Leggett meaningfully expands Somnigroup’s control over key components including innersprings, foam, and adjustable bases, while reducing reliance on third-party suppliers,” they also said. “The acquisition strengthens Somnigroup’s influence across the mattress industry, where its direct competitors will have very limited options to avoid relying on Somnigroup in the supply and retail sides of the business, while further enhancing its scale advantage versus smaller, less integrated peers.”
