Leggett & Platt’s $1.25 Billion Acquisition of Elite Comfort Solutions

Cravath is representing JPMorgan Chase Bank, N.A. in connection with the arrangement of $900 million of credit facilities that will be made available to Leggett & Platt in order to finance the acquisition.

Diversified manufacturer Leggett & Platt (NYSE: LEG) today announced that it has entered into a definitive agreement to acquire Elite Comfort Solutions, Inc. (ECS) for $1.25 billion in cash. The transaction has been approved by the Board of Directors of Leggett & Platt and is expected to close in January 2019, subject to customary closing conditions and regulatory approvals.

ECS, a portfolio company of Arsenal Capital Partners (Arsenal), is a leader in proprietary specialized foam technology primarily for the bedding and furniture industries. ECS’s annual sales for the fiscal year ended September 30, 2018 were $611 million. With 16 facilities across the United States, ECS operates a vertically integrated model, producing specialty foam, developing many of the chemicals and additives used in foam production, and manufacturing private-label finished products. These innovative specialty foam products include finished mattresses sold through both traditional and online channels, mattress components, mattress toppers and pillows, and furniture foams.

ECS is expected to generate double-digit sales growth and strong EBITDA margins that should be accretive to company average margins. Due to impacts from purchase accounting, ECS is expected to have a slightly negative effect on consolidated EBIT margins. For modeling purposes, in 2019, Leggett anticipates net interest expense of approximately $90 million, fully diluted shares of 136 million, and an approximate 23% tax rate. Including these factors, the acquisition is expected to be neutral to EPS in 2019 and accretive to EPS beginning in 2020.

The Cravath team is led by partner Stephen M. Kessing (Picture) and associate P. Purun Cheong on banking matters; partner Andrew J. Pitts and associates Steven Y. Li and Shu-en Wee on securities matters; and associates Richard Bohm and Jiyeon K. Barta on tax matters.

 

Involved fees earner: Stephen Kessing – Cravath Swaine & Moore; Purun Cheong – Cravath Swaine & Moore; Andrew Pitts – Cravath Swaine & Moore; Steven Y. Li – Cravath Swaine & Moore; Shu-en Wee – Cravath Swaine & Moore; Richard Bohm – Cravath Swaine & Moore; Jiyeon Barta – Cravath Swaine & Moore;

Law Firms: Cravath Swaine & Moore;

Clients: JPMorgan Chase & Co.;