oh, wait, not that kind of Sealy Mattress story, no, this one involves less enjoyable pursuits for the humans among us. But there is a class of folk, some say human, who enjoy nothing more than a forced corporate takeover or a leveraged buyout... ah, the sheer power of it all, muhahaha!! I'm getting ahead of the story. First, a little Sealy history:
...The failed deal, known as "burning bed," led to a dramatic slow-down in leveraged buy-outs.
In 1990 Ohio Mattress assumed the Sealy name... Bain Capital and a team of Sealy's senior executives acquired the company in 1997. In 1998 Sealy announced that it was moving from Cleveland to the High Point, NC, area.
In 2004, the company was acquired by Kohlberg Kravis Roberts & Co. and a team of Sealy management. The deal was valued at $1.5 billion but included significant debt. The company operated as a privately held corporation until 2005. "Say these guys who flip these companies take significant risks to keep these companies going to benefit the shareholders and by happenstance, the workers, and America as a whole. That's why they make the big bucks! But, what if their investments weren't that large, and their personal profits guaranteed at the expense of the shareholders and workers? Would that be capitalism working? Because that's what they did, time and again.
Josh Kosman has an interesting new article at Salon about what happened with Bain & Sealy. The whole article is worth reading, it's not too long and really lays it bare:
Mitt Romney’s Bain led a $791 million buyout of Sealy in 1997, putting $140 million down and, in typical private-equity fashion, having Sealy borrow the remaining $651 million to finance the deal and assume responsibility for paying it back. ...
(Despite the "one-sided mattress" and other mismanagement under Bain mentioned in the article) Bain and co-investors sold — “harvested,” if you like — Sealy in 2004 to fellow private equity firm KKR for $1.5 billion ($5.78 a share), pocketing $741 million for its $140 million investment. ...KKR then took Sealy public in 2006 at $16 a share.AND why is this news now?
Relative upstart Tempur-Pedic agreed to buy Sealy this week for $2.20 a share, paying less than $250 million for its stock and assuming its $750 million debt.
Thus Sealy joins Burger King and others on the list of Bain-acquired companies that collapsed soon after Bain cashed out — hardly surprising, since private equity is mostly about squeezing businesses as hard as possible, not creating long-term value...
A longtime Sealy executive told me he was very sad about last week’s sale. “I don’t like being acquired by an upstart like Tempur. We should have figured out how to handle them in the marketplace.” Now, some of Sealy’s 4,500 workers will likely lose their jobs in the merger.
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| "Oh, that's chump change for a guy like me!" |