Home and automotive furnishings maker Leggett & Platt Inc. agreed to acquire foam and beddings company Elite Comfort Solutions Inc., or ECS, from asset manager Arsenal Capital Partners Inc. for $1.25 billion in cash.
The Missouri-based diversified manufacturer said that the company will benefit from the Newnan, Ga.-based polyurethane foam maker's proprietary foam technology, strong position in the high-growth boxed bed market segment and e-commerce capabilities.
"Through the combination of Leggett & Platt and Elite Comfort Solutions, we will become the leading provider of differentiated products for the bedding industry and gain critical capabilities in proprietary foam technology, along with scale in the production of private-label finished mattresses," Karl Glassman, Leggett & Platt president and CEO, said in a Nov. 7 statement. "We look forward to benefiting from ECS's technical expertise and working together to implement manufacturing best practices across the acquired operations."
Leggett & Platt's board approved the transaction, which is expected to close in January 2019, subject to customary closing conditions and regulatory approvals. J.P. Morgan Securities LLC is acting as the exclusive financial advisor to Leggett & Platt.
Once the transaction is closed, ECS will become a separate business unit and operate within the Residential Products segment of Leggett & Platt, which will retain all 16 of ECS' manufacturing and warehousing facilities. The ECS management team will continue to lead the business.
The company expects the ECS transaction to have a slightly negative effect on its consolidated EBIT margins, but it will have a neutral effect on its EPS in 2019 and accretive to EPS beginning in 2020.
Leggett & Platt will fund the transaction through the expansion of its commercial paper program and related revolving credit agreement. The company also plans to enter into a $500 million five-year term loan with its current bank group.
As a result of the transaction, Leggett & Platt is changing its dividend payout target to nearly 50% of earnings from 50% to 60% of earnings previously.
Meanwhile, Leggett & Platt on Nov. 6 announced a fourth-quarter 2018 dividend of 38 cents, up by 2 cents per share from 2017. The dividend will be payable Jan. 15, 2019, to shareholders of record Dec. 14.
The company also appointed Mitch Dolloff as COO, effective Jan. 1, 2019. The post was last held by Karl Galssman in 2016 before he was appointed CEO. Dolloff will retain his current post as president of the Specialized Products and Furniture Products segments until a successor is named.
