LEXINGTON, Ky. – Bedding manufacturer Tempur Sealy International will acquire Dreams, a specialty bedding retailer located in the United Kingdom, for about $475 million.
The company said the acquisition, primarily from an affiliate of Sun Capital Partners, will accelerate the its growth in the largest European beading market, nearly doubling the company’s international sales compared with 2020. Dreams currently sells Tempurpedic and Sealy.
“Dreams has created a strong retailer brand and business model, known for its outstanding products and customer service,” said Scott Thompson, Tempur Sealy International chairman and CEO. “We have worked with Dreams for many years, and they are one of the most talented retailers we service. They have consistently demonstrated best-in-class web marketing, customer service and sales capabilities. This acquisition better positions both organizations to service customers and bring innovative products to market.”
Dreams operates a multi-channel sales strategy, with more than 200 brick-and-mortar retail locations, an online channel, as well as manufacturing and delivery operations. The retailer generated sales of about $400 million and EBITDA of about $75 million for the year ending Dec. 31, 2020. It is expected to generate annual sales of about $450 million in the first year post-acquisition.
“We are delighted to be joining the Tempur Sealy family,” said Dreams CEO Mike Logue. “It is recognition of the transformation we have delivered and an endorsement of our customer-focused strategy, our culture and our values. With Tempur Sealy, we expect to drive our growth strategy and build on our position as the most recommended specialist bed retailer in the U.K.”
Tempur Sealy said it will operate the retailer as an independent business led by the current management team. It is expected to complement the company’s existing U.K. Tempur operations and its recently formed Sealy U.K. joint ventures.
After the transaction closes, Tempur Sealy’s annualized worldwide direct-to-consumer business is expected to reach $1 billion in sales and its international segment will represent more than 20% of consolidated sales. The transaction is being financed through a combination of cash on hand and bank loans. The company’s pro forma leverage is expected to be slightly less than two times adjusted EBITDA as defined in the company’s credit agreement. Finally, the company today entered into an amendment of its senior credit facility that increases its liquidity by $300 million.
The transaction is expected to close in the third quarter, subject to regulatory approval from the UK Financial Conduct Authority.
“This transaction is consistent with our stated strategy of acquiring companies when we see their addition as mutually beneficial and accretive to long-term shareholder value,” Thompson said. “We expect, over time, to leverage Tempur Sealy’s global scale to realize synergy opportunities and long-term sales growth.”