Two Canadian investment firms have offered to buy national mattress retailer Sleep Country Canada in a friendly deal valued at $356 million.
Sleep Country, which has a high profile across the country through its national ads featuring president Christine Magee, owns Canada’s largest chain of mattress stores. The chain includes 27 stores in Quebec under the name Dormez-vous Sleep Centres. It also has 46 stores in Arizona under the Sleep America banner as well as its 133 Sleep Country Canada stores.
Birch Hill Equity Partners Management Inc. and Westerkirk Capital Inc., both based in Toronto, have offered $22 for each unit of the income trust that owns Sleep Country.
That’s 37% above the Wednesday closing price for Sleep Country units, valuing the transaction at $356 million.
Sleep Country’s board supports the bid, but it requires approval from unitholders.
“The offer reflects a significant premium and a strong value for unitholders as well as providing an excellent liquidity opportunity that the board of trustees fully and enthusiastically supports,” said Scott Anderson, chair of a committee of independent trustees who evaluated the offer for Sleep Country.
The fund is entitled to consider and accept a superior proposal, if one comes along. Birch Hill and Westerkirk would be entitled to a termination fee of $7.75 million.
Sleep Country president Magee, who has been the spokesperson for Sleep Country radio and television ads for years, has signed an agreement to remain with the firm, as has chief executive Stephen Gunn.
Magee and Gunn were inducted into the Canadian Marketing Hall of Legends in 2005 for their contributions to the building of Sleep Country.
Birch Hill Equity Partners already indirectly holds about 9.6% of the mattress retailer.
“Sleep Country Canada has become the leading mattress retailer in Canada as a result of its outstanding management team, reputation for customer service excellence and dedicated employees,” said Steve Dent, managing partner of Birch Hill. “We look forward to working with Sleep Country Canada’s management to continue to grow the business.”
Westerkirk Capital has substantial holdings in the hospitality, aviation, manufacturing and real estate sectors.
In its latest financial report, Sleep Country reported net earnings of $5.8 million, up from $5.5 million a year ago, as sales increased nearly 10%.
Sales in the quarter rose to $91.4 million from $83.5 million.
Sleep Country said the growth in sales came as its Sleep Country Canada and Dormez-vous banners increased 12.9% over the same period in 2007, offset by a 3.5% fall in sales under the Sleep America banner in Arizona, where the regional housing market has slumped badly.
