South African retail giant Steinhoff International Holdings N.V is poised to become the world’s largest retailer of beds with its acquisition of the largest mattress retailer in the United States.
Steinhoff announced this week that it is acquiring Mattress Firm Holding Corp., Texas owner of the Sleepy’s and Sleep Train brands and 3,500 stores, for about $2.4 billion. The deal, which continues to lessen Steinhoff’s exposure in Africa, will give Steinhoff a whopping 25 percent share of the U.S. specialty-bed retail market and make it what Steinhoff itself describes as “the world’s largest multi-brand mattress retail distribution network.”
Once the transaction is finalized as expected in the third quarter of this year, Mattress Firm will operate as a subsidiary of Steinhoff.
“This transaction will allow Steinhoff to not only enter the U.S. market with an industry leading partner and a national supply chain, but it will also expand Steinhoff’s global market reach in the core product category of mattresses,” Markus Jooste, Steinhoff’s chief executive officer, said in the statement.
Often referred to as Africa’s IKEA after the Scandinavian home furnishing retail chain, Steinhoff manufactures, sources and sells furniture, household goods and clothing in Europe, Africa and Australasia. Its roots go back to Germany, where it launched in 1964. The company bought South African lounge furniture manufacturer Gommagomma Holdings Ltd. in 1997 and moved its headquarters to South Africa in 1998, reportedly to take advantage of the country’s low production costs.
Today, Steinhoff is the eighth biggest company listed on the Johannesburg Stock Exchange, with a market capitalization of 346.08 billion South African rand, or $25.26 billion. It’s company documents show no Blacks on its executive and divisional management teams, or among its directors.
Steinhoff in recent years has been on a buying spree in Europe, including purchases such as Conforama of France, Europe’s second largest home furnishings retailer, and Poundland, Britain’s discount retail chain. While these purchases, and now its acquisition of Mattress Firm in the U.S., lessen its exposure in Africa, Steinhoff insists it is not leaving the continent. Company documents show it retails 15 household brands in more than 1,100 outlets in six countries in Africa.
“We are South Africans and will stay that way,” Jooste said in June in an interview with South African business and news site Fin24, when asked about the company’s back-to- roots shift to the Frankfurt Stock Exchange for its primary listing and the relocation of its corporate headquarters to Amsterdam from Johannesburg.
Jooste noted in a media release at the time of the December 2015 listing on the FSE that, with more than 60 percent of Steinhoff’s revenues generated from Europe, it made sense to list on a major European stock exchange. Moreover, it will enhance the company’s ability to access global capital markets as it expands internationally.
RBC Europe estimates that, with the purchase of Mattress Firm, about 20 percent of the company’s revenue now will come from the United States, 44 percent from Europe and 27 percent from Africa. Part of its Africa revenue will come from South African clothing and footwear discounter Pepkor Holdings Proprietary Ltd., which also has stores across Africa and which Steinhoff bought just last year for about $5.7 billion.
