By Janice Kew and Luca Casiraghi
Bought for $3.8 billion two years ago, Mattress Firm has emerged as a headache for Steinhoff as it strives to shore up liquidity following an accounting scandal. The 3,300-store chain expanded too aggressively, suffered from ineffective marketing and has been embroiled in a dispute with suppliers, Steinhoff said in a presentation to creditors in London on Thursday.
Steinhoff bought Mattress Firm toward the end of an acquisition spree that preceded the uncovering of accounting irregularities in December, which wiped almost 95 percent off the share price. The South African company secured an agreement with lenders over the restructuring of almost 10 billion euros ($11.7 billion) of debt in July, buying it time to stabilise an empire that also includes Conforama in France and Pepkor Europe.
Mattress Firm needs “incremental liquidity” for its recovery to be secured and management led by Chief Executive Officer Steve Stagner are considering ways to access capital, Steinhoff said. Stagner has worked at Mattress Firm since 1996, and in March returned to the CEO job he held for six years through 2016. Mattress Firm has hired restructuring advisers including AlixPartners LLP and Guggenheim Securities, along with law firm Sidley Austin LLP.
Tempur Sealy ended its supply agreement with the bedding retailer in 2017 after Mattress Firm demanded significant concessions following the Steinhoff takeover. Tempur Sealy has since sued the retailer for allegedly “selling confusingly similar products under the ‘Therapedic’ name.”
Steinhoff shares declined 5.5 percent as of 12:33 p.m. in Frankfurt, where the company moved the primary listing from Johannesburg in 2015.
The first of two meetings with lenders on Thursday is scheduled to last for almost 3 1/2 hours and includes presentations from the management of all Steinhoff’s major chains. Pepkor Europe, led by former Walmart Inc. executive Andy Bond, demonstrated a healthier financial position than its US sister company, with earnings growth across brands such as Eastern Europe-focused Pepco and the UK’s Poundland. The company is targeting more than 4,000 stores within five years, compared with 2,281 now.
Earlier Thursday, Poundland said it would take over 20 stores formerly owned by its near namesake Poundworld, which went bust earlier this year.
More than 90 percent of the creditors across units Steinhoff Europe AG, Steinhoff Finance Holding and Stripes US have now agreed to the debt restructuring. The company plans to kick off a so-called Company Voluntary Arrangement in the UK for the SEAG unit on Oct. 19. It also completed the refinancing of the real estate unit Hemisphere, extending the maturity of 775 million euros of loans to December 2021.