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Select Comfort Corporation, the listed, Minnesota-based mattress company, will have cash on its balance sheet after a USD 150m share repurchase. This cash has been purposely left available for acquisitions, said CEO William McLaughlin.
However two investors said the company is a takeover target. It is smaller than its competitor, Tempur-Pedic, and management has been cryptic about plans for growth, one investor said. The second investor agreed that the company could get bought by Tempur-Pedic, based in Kentucky, or private equity, noting that Select Comfort has had issues and had to lower guidance a few times. However, its technology is valuable and would have potential to a buyer, the second investor added.
When asked, McGlaughlin said the company ”could be” a target. But any suitor would have to pay a premium to the company’s USD 851m market cap, because the board has faith in Select Comfort’s long term growth plan, he said. McGlaughlin added that the company, with its cash, will look opportunistically at acquisitions, particularly international furniture retailers that can be bought and rebranded as Select Comfort stores.
Additionally McGaughlin said Select Comfort could look to add on mid-sized targets in complimentary space like a pillow company that has a value-added technology, or possibly a bed accessory company.
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