UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE TO
Tender Offer Statement under Section 14(d)(1) or 13(e)(1)
of the Securities Exchange Act of 1934
Mattress Firm Holding Corp.
(Name of Subject Company (Issuer))
Stripes Acquisition Corp.
a direct wholly-owned subsidiary of
Stripes US Holding, Inc.
a direct wholly-owned subsidiary of
Steinhoff International Holdings N.V.
(Names of Filing Persons (Offerors))
Common Stock, par value $0.01 per share
(Title of Class of Securities)
57722W106
(CUSIP Number of Class of Securities)
Steinhoff International Holdings N.V.
Block D, De Wagenweg Office Park
Stellentia Road
Stellenbosch, South Africa
Attention: Stephanus Johannes Grobler
Telephone: +27 21 808 0700
(Name, address, and telephone numbers of person authorized to receive notices and communications on behalf of filing persons)
With copies to:
Scott I. Sonnenblick
Peter Cohen-Millstein
Linklaters LLP
1345 Avenue of the Americas
New York, New York 10105
(212) 903-9000
CALCULATION OF FILING FEE
Transaction Valuation* |
|
Amount Of Filing Fee* |
N/A |
|
N/A |
* A filing fee is not required in connection with this filing as it relates solely to preliminary communications made before the commencement of a tender offer.
o Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: N/A |
Filing Party: N/A |
Form or Registration No.: N/A |
Date Filed: N/A |
x Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which the statement relates:
x third-party tender offer subject to Rule 14d-1.
o issuer tender offer subject to Rule 13e-4.
o going-private transaction subject to Rule 13e-3.
o amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the results of the tender offer: o
If applicable, check the appropriate box(es) below to designate the appropriate rule provision(s) relied upon:
o Rule 13e-4(i) (Cross-Border Issuer Tender Offer)
o Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)
The pre-commencement communication filed under cover of this Schedule TO relates to a planned tender offer by Stripes Acquisition Corp., a Delaware corporation (Purchaser), a direct wholly-owned subsidiary of Stripes US Holding, Inc., a Delaware corporation (HoldCo), a direct wholly-owned subsidiary of Steinhoff International Holdings N.V., a company incorporated under the laws of the Netherlands (Naamloze Vennootschap) (Parent), for all of the issued and outstanding shares of common stock, par value $0.01 per share (the Common Stock), of Mattress Firm Holding Corp., a Delaware corporation (Mattress Firm), to be commenced pursuant to the Agreement and Plan of Merger, dated as of August 6, 2016, by and among Purchaser, HoldCo, Parent and Mattress Firm. This Schedule TO is being filed on behalf of Purchaser, HoldCo and Parent.
Additional Information and Where to Find It
The tender offer described here, which has not yet commenced, will be made for the Common Stock of Mattress Firm. The press release and the analyst and media presentation are for informational purposes only and are not an offer to buy or the solicitation of an offer to sell any Mattress Firm securities. The solicitation and the offer to buy the Mattress Firm shares will be made only pursuant to a Tender Offer Statement on Schedule TO Parent intends to file with the SEC. Upon commencement of the tender offer, Mattress Firm security holders and other investors should read carefully the Tender Offer Statement on Schedule TO, as well as the Solicitation/Recommendation Statement on Schedule 14D-9 that Mattress Firm will file, and any amendments or supplements thereto, prior to making any decisions with respect to the tender offer because these documents contain, or will contain, important information, including the terms and conditions of the tender offer. Mattress Firm security holders and other investors will be able to obtain copies of these tender offer materials and any other documents when they are filed with the SEC, from the SECs website (http://www.sec.gov), without charge. Such materials filed by Parent will also be available for free at Parents website (http://www.steinhoffinternational.com) or Mattress Firms website (http://ir.mattressfirm.com/).
Exhibit 99.1
Steinhoff International Holdings NV to Acquire Mattress Firm Holding Corporation for $64.00 per Share
Stellenbosch August 7, 2016 -Steinhoff (FRANKFURT: SNH) and Mattress Firm (NASDAQ: MFRM) today announced that they have entered into a definitive merger agreement under which Steinhoff will, subject to the successful consummation of a cash tender offer, acquire Mattress Firm for $64.00 per share in cash. This represents a total equity value of approximately $2.4 billion and an enterprise value for Mattress Firm of approximately $3.8 billion including net debt.
The investment in Mattress Firm will create the worlds largest multi-brand mattress retail distribution network and facilitate Steinhoffs entry into the U.S. Similar to the European retail mattress market, where Steinhoff is a leader, the North American mattress industry has demonstrated long term stability and consistent growth. Mattress Firm represents an attractive investment proposition to Steinhoff through its national footprint and leadership in the U.S. mattress retail market.
The acquisition price is a premium of 115% to Mattress Firms closing price of $29.74 per share at the close of trading on August 5, 2016. The transaction has been unanimously approved by the board of directors of Mattress Firm and the management and supervisory boards of Steinhoff.
Markus Jooste, CEO of Steinhoff said: The boards of Steinhoff and its management team are enthusiastic about the opportunities this transaction creates. 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 Steinhoffs global market reach in the core product category of mattresses. The Mattress Firm brand and speciality retail concept are a strong complement to the Steinhoff group retail brand portfolio in the many geographies where the group operates.
Steinhoff recognises the strength of Mattress Firms experienced and entrepreneurial management team and its proven track record of delivering growth, profitability and leadership in the U.S. retail mattress market. We look forward to welcoming Mattress Firm employees to be part of the one of the worlds leading multi-format retailers.
Steve Stagner, Mattress Firm Executive Chairman said: The Mattress Firm board believes that the transaction provides significant value to our stockholders through the premium to our share price and the immediate liquidity at closing, while giving Mattress Firm an ideal partner with a proven track record in the complete mattress supply chain including the retail and manufacture of mattresses. This expertise will complement our diverse selection of products provided by our valuable partners. Steinhoffs management team shares our vision for the growth and expansion of Mattress Firm and, as such, we believe they are the right long-term partner for our customers, employees, suppliers and other stakeholders.
Transaction Details
Under the terms of the merger agreement, an indirect, wholly owned subsidiary of Steinhoff will commence a cash tender offer to purchase up to all of the outstanding shares of Mattress Firm common stock for $64.00 per share in cash. The closing of the tender offer is subject to customary closing conditions, including regulatory clearances and a majority tender condition, following which all remaining stockholders of Mattress Firm will be cashed out, with a right to receive the offer price in a merger that will take place as soon as practicable thereafter. The transaction is expected to close by or around the end of the third calendar quarter.
Steinhoff intends to finance the acquisition through a combination of bank and bridge loans. The closing of the transaction is not subject to any financing condition.
Steinhoff will post a slide presentation of the transaction on its website: www.steinhoffinternational.com.
About Steinhoff
Steinhoff is an integrated retailer that manufactures, sources and retails furniture, household goods and general merchandise in Europe, Africa and Australasia. Steinhoffs vertically integrated business model is based upon a strategy of sourcing and manufacturing products at low cost and distributing them to its value-conscious customer base through its extensive retail footprint.
Steinhoffs integrated retail divisions comprise of:
· Household goods comprising furniture and homeware retail businesses;
· General Merchandise focusing on clothing and footwear, accessories and homeware; and
· Automotive dealerships in South Africa which provide vehicles, parts, insurance, accessories and servicing.
Steinhoff has a primary listing on the Frankfurt Stock Exchange and a secondary listing on the Johannesburg Stock Exchange and as at August 5, 2016 (the latest practicable date prior to publication of this Announcement) has a market capitalization of approximately 22 billion ($24 billion). Steinhoff reported revenue and operating profit for the nine-months ended March 31, 2016 of 9.9 billion ($11 billion) and 1.1 billion ($1.2 billion) respectively, and employs approximately 105,000 people.
For more information, please visit www.steinhoffinternational.com.
About Mattress Firm
With more than 3,500 company-operated and franchised stores across 48 states, Mattress Firm (NASDAQ: MFRM) has the largest geographic footprint in the United States among multi-brand mattress retailers. Founded in 1986, Houston-based MFRM is the nations leading bedding retailer with over $3.5 billion in pro forma sales in 2015. MFRM, through its brands including Mattress Firm, Sleepys and Sleep Train, offers a broad selection of mattresses, bedding accessories and other related products from leading manufacturers, including Serta, Simmons, Tempur-Pedic, Sealy, Stearns & Foster, King Coil and Hampton & Rhodes. For more information, please visit Mattress Firms website at www.mattressfirm.com.
Advisors
Linklaters LLP acted as legal counsel to Steinhoff.
Mattress Firms exclusive financial advisor for the transaction was Barclays.
Ropes & Gray LLP acted as legal counsel to Mattress Firm.
Contact Information
Steinhoff
Mariza Nel, Director, Corporate Services (Investor Relations)
investors@steinhoffinternational.com Tel: +27 (0)21 8080 0711
Mattress Firm Investor Relations
Scott McKinney, Vice President of Investor Relations
ir@mattressfirm.com, Tel: +1 713-328-3417
Mattress Firm Media Contact
Erica Martinez, Jackson Spalding
emartinez@jacksonspalding.com, Tel: +1 214-269-4404
Forward Looking Statements
This press release contains forward-looking statements regarding Steinhoff and Mattress Firm, including, but not limited to, statements related to the anticipated consummation of the tender offer for Mattress Firm common stock and the timing and benefits thereof, and estimated future financial results, regulatory submissions and performance of Mattress Firms business in mattresses and related products and accessories, as well as other statements that are not historical facts. These forward-looking statements are based on each of the companies current expectations and inherently involve significant risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks related to Steinhoffs ability to complete the transaction on the proposed terms and schedule, including risks and uncertainties related to the satisfaction of closing conditions; the possibility that competing offers will be made; risks associated with business combination transactions, such as the risk that the acquired business will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected; risks related to future opportunities and plans for the combined company, including uncertainty of the expected future regulatory filings, financial performance and results of the combined company following completion of the proposed transaction; disruption from the proposed acquisition, making it more difficult to conduct business as usual or maintain relationships with customers, employees or suppliers; and the possibility that if Steinhoff does not achieve the perceived benefits of the proposed acquisition as rapidly or to the extent anticipated by financial analysts or investors, the market price of Steinhoffs ordinary shares could decline; and those other risks detailed under the caption Risk Factors and elsewhere in Mattress Firms U.S. Securities and Exchange Commission (SEC) filings and reports, including in Mattress Firms Quarterly Reports on Form 10-Q for the quarter ended May 3, 2016 and Annual Report on Form 10-K for the year ended February 2, 2016, which are filed with the SEC, and in Steinhoffs filings and reports filed with the Frankfurt Stock Exchange or the Johannesburg Stock Exchange and future filings and reports by either company. Neither Steinhoff nor Mattress Firm undertakes any duty or obligation to update any forward-looking statements contained in this press release as a result of new information, future events or changes in its expectations.
Important Information
The tender offer described here, which has not yet commenced, will be made for the common stock, par value $0.01 per share, of Mattress Firm. This press release is for informational purposes only and is not an offer to buy or the solicitation of an offer to sell any Mattress Firm securities. The solicitation and the offer to buy the Mattress Firm shares will be made only pursuant to a Tender Offer Statement on Schedule TO Steinhoff intends to file with the SEC. Upon commencement of the tender offer, Mattress Firm security holders and other investors should read carefully the Tender Offer Statement on Schedule TO, as well as the Solicitation/Recommendation Statement
on Schedule 14D-9 that Mattress Firm will file, and any amendments or supplements thereto, prior to making any decisions with respect to the tender offer because these documents contain, or will contain, important information, including the terms and conditions of the tender offer. Mattress Firm security holders and other investors will be able to obtain copies of these tender offer materials and any other documents when they are filed with the SEC, from the SECs website (http://www.sec.gov), without charge. Such materials filed by Steinhoff will also be available for free at Steinhoffs website (http://www.steinhoffinternational.com) or Mattress Firms website (http://ir.mattressfirm.com/).
Exhibit 99.2
ACQUISITION OF MATTRESS FIRM HOLDING CORPORATION ANALYST AND MEDIA PRESENTATION 8 AUGUST 2016
NOTICES REGARDING INFORMATION CONTAINED IN THIS PRESENTATION The tender offer described herein, which has not yet commenced, will be made for the common stock, par value $0.01 per share, of Mattress Firm Holding Corp. (Mattress Firm). This presentation is for informational purposes only and is not an offer to buy or the solicitation of an offer to sell any Mattress Firm securities. The solicitation and the offer to buy the Mattress Firm shares will be made only pursuant to the Tender Offer Statement on Schedule TO Steinhoff International Holdings N.V. (Steinhoff) intends to file with the U.S. Securities and Exchange Commission (the SEC). Mattress Firm security holders and other investors should read carefully the Tender Offer Statement on Schedule TO, as well as the Schedule 14D-9 we expect Mattress Firm to file, and any amendments or supplements thereto, prior to making any decisions with respect to the tender offer because these documents contain, or will contain, important information, including the terms and conditions of the tender offer. Mattress Firm security holders and other investors will be able to obtain copies of these tender offer materials and any other documents filed with the SEC, from the SECs website (http://www.sec.gov), without charge. Such materials filed by Steinhoff will also be available for free at Steinhoffs website (http://www.steinhoffinternational.com). Special Notice Regarding Publicly-Available Information The information contained in this presentation is either publicly available or does not constitute material non-public information or non-public price sensitive information with respect to the Company, its subsidiaries or their respective securities . The Company does not take any responsibility for the recipient's decision to limit the scope of the information it has obtained in connection with its evaluation of the Company and the transaction described herein. Forward Looking Statements and Non-GAAP/Non-IFRS Information This presentation contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this presentation are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "anticipate," "estimate," "expect," "project," "plan, target, "intend," "believe, or the negative of these terms, and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. These forward-looking statements are based on estimates and assumptions that we have made in light of our industry experience and on our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. No representations or warranties are made by the Company or any of its affiliates as to the accuracy of any such forward-looking statements. Whether or not any such forward-looking statements are in fact achieved will depend upon future events some of which are not within the control of the Company. As you consider this presentation, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond our control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results and cause them to differ materially from those anticipated in the forward-looking statements. Because of these factors, we caution that you should not place undue reliance on any of our forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking statements in this presentation after the date of this presentation. This presentation includes As Adjusted and Pro forma data, which excludes, for example, non-recurring charges and makes adjustments to allow for comparability of information. Such As Adjusted and Pro forma data is considered a financial measure not in accordance with United States generally accepted accounting principles (US GAAP) nor accepted under International Financial Reporting Standards (IFRS), and is not in lieu of, or preferable to, As Reported, or statutory reported financial data. However, we are providing this information as we believe it facilitates year-over-year comparisons for investors and financial analysts. Market and Industry Data This presentation includes industry and trade association data, forecasts and information that was prepared based, in part, upon data, forecasts and information obtained from independent trade associations, industry publications and surveys and other independent sources available to the Company. Some data also are based on the Companys good faith estimates, which are derived from managements knowledge of the industry and from independent sources. These third-party publications and surveys generally state that the information included therein has been obtained from sources believed to be reliable, but that the publications and surveys can give no assurance as to the accuracy or completeness of such information. The Company has not independently verified any of the data from third-party sources nor has it ascertained the underlying economic assumptions on which such data are based. Financial Information for Acquired or to be Acquired Business The financial information set forth in this presentation is based on publicly available information prepared by the management of the respective companies presented. Not all information presented in this report has been audited or reviewed by the Companys independent auditors. This financial information has also been prepared under IFRS (for Steinhoff) or US GAAP (for MFRM), and the historical past practices of MFRM may differ from the historical practices and interpretations applied by the Company. The results ultimately reflected in the Companys audited financial statements may vary from the information provided in this presentation.
AGENDA 1 Steinhoff Group overview 2 Mattress Firm Group overview 3 Acquisition overview Salient terms and strategic rationale 4 Conclusion
Group Overview
Steinhoff is a vertically integrated, diversified international mass market retailer . . . focused on household goods and general merchandise product categories STEINHOFF OVERVIEW 5 Source: Steinhoff International Holdings NV
6 Source: Steinhoff International Holdings NV Specialises in product categories and price ranges that appeal to the mass market Protects price positioning via: greater control and vertical integration of supply chain Aggregating volumes and capitalising on purchasing power Operates an international, diverse, multi-brand strategy Adopts a decentralised management approach with support provided by Central Group Services STEINHOFF STRATEGY
7 Notes and Sources: (1) Pro forma LTM data reflects the unaudited pro forma revenue and operating profit of Steinhoff International Holdings NV adjusted for Pepkor and kika-Leiner annualisation for the twelve month period ending 31 December 2015 (sourced from unaudited half year financial results and the Steinhoff Frankfurt listing prospectus). The net asset value is as disclosed in the unaudited half year financial results of the group as at 31 December 2015. Revenue and operating profit have been translated at the average rate of $1.11: 1.00 and net assets have been translated at the closing rate of $1.089 :1.00 (sourced from Oanda) (2) 9month FY16 refers to the nine month period ended 31 March 2016 as disclosed in Steinhoff International NVs unaudited quarterly statement ). Revenue and operating profit have been translated at the average rate of $1.103:1.00 and net assets have been translated at the closing rate of $1.139 : 1.00(sourced from Oanda). Market capitalisation is translated at the spot rate of $1.106: as at 5 August 2016 (3) Operational metrics above as disclosed in the unaudited half year financial results of the group as at 31 December 2015, with the exception of factories which includes an additional Pepclo factory located in South Africa, and containers actually shipped in FY15/16 (per Steinhoff management Pro forma LTM1 billion Pro forma LTM1 $ billion 9month FY162 billion 9month FY162 $ billion Revenue 13.7 15.2 9.9 11.0 Operating profit 1.5 1.7 1.1 1.2 Net asset value 12.3 13.4 12.1 13.8 Market capitalisation (at 5 August 2016) 22 billion ($24 billion) STEINHOFF HIGHLIGHTS 6 913 RETAIL OUTLETS 6.3 million m2 RETAIL SPACE APPROXIMATELY 105 000 EMPLOYEES 22 FACTORIES3 100 000+ CONTAINERS SHIPPED3 1 million m2 WAREHOUSE SPACE 4 million m2 PROPERTY PORTFOLIO
THREE REPORTING SEGMENTS 8 Notes: 1. For the six months ending 31 December 2015 Source: Steinhoff International NV unaudited interim results for the six months ended 31 December 2015 HOUSEHOLD GOODS comprises a vertically integrated furniture, household goods and related retail business serving the discount and value consumer market segments in Europe, Australasia and Africa. The retail operations are supported by the integrated supply chain, which includes manufacturing, sourcing and logistics operations, as well as an extensive and strategic property portfolio. GENERAL MERCHANDISE comprises the operations of the Pepkor Group. Pepkor is a leading retailer selling a range of everyday necessities to its price-sensitive and value-conscious customer base, including clothing, footwear, household goods, personal accessories and cellular products. AUTOMOTIVE comprises the groups automotive retail businesses in South Africa. Unitrans Automotive represents a number of international automotive brands and services its customers from its network of dealerships located throughout southern Africa. Hertz car rental conducts its business in Namibia and South Africa. 73% OF STEINHOFF OPERATING PROFIT1 25% OF STEINHOFF OPERATING PROFIT1 2% OF STEINHOFF OPERATING PROFIT1
HOUSEHOLD GOODS REPRESENTS 9 FY12 FY13 FY14 FY15 H1FY16 2 202 2 206 2 276 2 218 2 362 Furniture and homeware retail businesses STEINHOFFS LARGEST OPERATING SEGMENT IS HOUSEHOLD GOODS, OF WHICH MATTRESSES AND BEDDING FORMS A MAJOR COMPONENT Notes: 1. For the six months ending 31 December 2015 Source: Steinhoff International NV unaudited interim results for the six months ended 31 December 2015 Number of retail outlets
Manufacturing ~20% market share (by sales) Several factories in aggregate producing ~3,000 mattress and ~1,000 bases daily Distributes to >1,000 retail outlets #1 mattress producer by sales in France JV with the Pikolin Group in Cofel2, one of Europes largest mattress producers (~1million p.a.) 5 bedding factories across France #2 bedding manufacturer in South Africa3 with 6 factories Produces >2,000 base and mattress sets per day 4 manufacturing facilities in Australia producing ~1,000 mattresses and ~250 bases daily United Kingdom Europe South Africa Australia and NZ Retail #1 bed retailer in the UK with >270 stores and ~10% market share #1 mattress distributor in France1 and has a significant retail presence in Croatia, Italy, Portugal, Spain and Switzerland #1 bedding distributor in South Africa through JD Group, with estimated market share of ~25% One of the largest bedding specialists / retailers in Australia and New Zealand with more than 140 stores STEINHOFF IS A STRONG COMPETITOR GLOBALLY IN MATTRESSES AND BEDDING; THROUGH VERTICALLY INTEGRATED OPERATIONS Source: Steinhoff internal estimates (1) IPEA 10 (3) Through Steinhoffs associate interest in KAP (2) Subject to European anti-trust approval
Group Overview
MATTRESS FIRM OVERVIEW 12 THE U.S. MARKET LEADER IN SPECIALITY MATTRESS RETAIL Notes: (1) Includes 124 franchise locations, as at 3 May 2016 (2) Reflects net sales of the respective retailers divided by the estimated size of the US mattress retail market in 2014; Furniture Today 2015 Bedding Yearbook Source: Extracts from MFRM Investor Presentation (June 2016) and Mattress Firm Public Lenders Presentation (14 January 2016), and Mattress Firm management Omni-channel sales with best-in-class customer experience Largest footprint 3 594 locations 1 Market share # 1 Mattress speciality retailer in the U.S. Extensive range offering Significant scale National distribution Same day / next day delivery capability in Continental U.S. and Hawaii ~$3.8+ billion Fiscal 2016 projected sales ~25% Market share amongst mattress speciality retailers in the US(2) 75 Distribution centres 3hr Delivery window 80% Transactions delivered 35% Same day capacity
COMPELLING INDUSTRY DYNAMICS Long-term stability and consistent growth Highly fragmented industry Speciality retailers such as MFRM continue to take market share Pent-up demand with ~80% of industry sales from replacements BEST-IN-CLASS SPECIALITY RETAILER Largest and only national footprint with significant scale Unique selling proposition (customer experience, omni-channel selling, products etc.) Strong and established distribution network PROVEN TRACK RECORD OF DRIVING PROFITABILITY High correlation between penetration and profitability History of developing markets through organic growth and acquisitions STRONG FREE CASH FLOW SUPPORTS GROWTH Less than one year cash-on-cash payback with new MFRM stores Strong free cash flow driven by low maintenance capex and working capital needs Supports growth capex and deleveraging Proven ability to integrate acquisitions and reduce leverage HIGHLY ACHIEVABLE GROWTH PLAN Significant store growth runway in existing and acquisition markets Opportunity to capture benefits of national scale over time Increase store volumes and margins Build on existing omni-channel capabilities EXPERIENCED AND INVESTED MANAGEMENT TEAM Top executives have between 12 and 22 years of relevant experience Mix between retail and industry experience An entrepreneurial management team provides a cultural fit with Steinhoff MATTRESS FIRM OVERVIEW 13 MATTRESS FIRM OFFERS AN ATTRACTIVE VALUE PROPOSITION FOR STEINHOFF 1 2 3 4 5 Source: Extract from MFRM Investor Presentation (January 2016), MFRM Public Lender Presentation (14 January 2016), and MFRM Investor Presentation (June 2016) 6
COMPELLING US INDUSTRY TRENDS FOR AN INVESTMENT IN THE MATTRESS MARKET 14 Source: ISPA Mattress Industry US Market Forecast issued May 2016; mattress and foundation sales Source: ISPA 2009 and 2015 Mattress Industry Report of Sales & Trends. Long-term growth rate from 1980-2015 Source: MFRM Investor Presentation (June 2016) Strong recovery post the recession, as bedding sales are most correlated with consumer sentiment and gross domestic product growth Replacement nature of bedding has shielded speciality retailers from volatility experienced in the housing market Historical 5% long-term growth rate, with projected industry total sales growth of 3.5%(2016) and 6.5% (2017)(1)(2) 1 US WHOLESALE BEDDING SALES SIGNIFICANTLY REBOUND AFTER PRIOR RECESSIONS (1) 9% 5% -2% 16% 7% 6% 7% 9% 8% 2% 0% 3% 8% 8% 9% 5% 5% 8% 11% 9% 5% 0% 4% 8% 12% 12% 5% 1% -9% -9% 4% 8% 9% 2% 8% 7% 4% 7% 1% 5% 6% 5% 0% 4% 5% 4% 6% 2% -2% 1% 2% 3% 6% -1% -2% -11% -9% 6% 0% 4% 1% 4% 5% 2% 4% 2% 2% 2% 5% 5% 2% 3% 7% 3% 3% 2% 3% 5% 9% 6% 6% 4% 2% -1% -2% 8% 5% 1% 4% 2% 2% 3% Dollar Value Units Avg. Unit Price (AUP) YOY GROWTH +23% +16% +24% +11% $ in billions Recession Recovery $1.3 $1.4 $1.4 $1.6 $1.7 $1.8 $1.9 $2.1 $2.3 $2.3 $2.3 $2.4 $2.6 $2.8 $3.0 $3.2 $3.3 $3.6 $4.0 $4.4 $4.6 $4.6 $4.8 $5.2 $5.8 $6.5 $6.8 $6.9 $6.2 $5.7 $5.9 $6.3 $6.8 $7.0 $7.5 $8.0 $8.3 $8.9 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16F '17F
MFRM HAS >25% MARKET SHARE ACHIEVED THROUGH MARKET CONSOLIDATION AND GROWTH OF SPECIALITY RETAILERS 15 Notes and sources: Extracted from MFRM Investor Presentation (June 2016). (1) Furniture Today, September 21, 2015 (2) Reflects net sales of the respective retailers divided by the estimated size of the US mattress retail market in 2014; Furniture Today 2015 Bedding Yearbook (3) Pro forma for the February 5, 2016 Sleepys acquisition (4) Furniture Today Top 100, May 2016. MFRM store count includes franchised locations 1 1993 (1) 2014(1) TOP MATTRESS SPECIALITY RETAILERS (1) ($ MILLION) 25.2% MARKET SHARE Mattress Speciality Retailers Mattress Speciality Retailers Furniture retailers 56% Furniture retailers 34% Other 14% Other 14% Department stores 11% Department stores 5% 19% 47%
IT IS THE ONLY US BEDDING RETAILER WITH NATIONAL PRESENCE 16 Includes 124 franchise locations (as of 3 May 2016) Source: MFRM Investor Presentation (June 2016) MFRM HAS THE HIGHEST MARKET PENETRATION FOR A BEDDING RETAILER IN >90% OF MARKETS IN WHICH IT OPERATES 2 # NUMBER OF STORES 0 30
MFRM HAS A STRONG TRACK RECORD OF GROWTH (THROUGH ACQUISITIONS AND ORGANICALLY) 17 REVENUE ($m) ADJUSTED EBITDA ($m) Notes: (1) Selection of the largest acquisitions completed by MFRM over the last 6 years Source: Mattress Firm Investor Presentations (June 2016); Mattress Firm Public Lenders Presentation (14 January 2016); MFRM / Sleepys 8K filing for FY15 data. Forecast information represents the midpoint of MFRM management guidance MFRM RAPID GROWTH UNDERPINNED BY ACQUISITIONS1 3 2011/2012 236 STORES ATLANTA, MINNEAPOLIS, ST LOUIS HOUSTON, DALLAS, JACKSONVILLE, MIAMI, ORLANDO, SW FLORIDA, TAMPA 2014 131 STORES CHICAGO ORLANDO 2014 314 STORES CALIFORNIA, HAWAII, IDAHO NEVADA, WASHINGTON, OREGON 2016 1 065 STORES NORTHEAST, NEW ENGLAND, MID-ADLANTIC, MIDWEST +24.1% MFRM + Sleepys Sleepys MFRM $m 2016 (F) 2015 2014 2013 2012 +20.3% MFRM Sleepys MFRM + Sleepys 2016 (F) 2015 2014 2013 2012 $m 308 248 214 199 3 670 2 859 2 216 1 921 3,850 1,007 1,217 1,806 2,542 914 999 1,053 1,128 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 341 121 140 190 255 78 74 58 53 0 50 100 150 200 250 300 350
ATTRACTIVE NEW STORE ECONOMICS WITH CASH-ON-CASH PAYBACK IN <1 YEAR 18 Notes : Analysis applies only to MFRM branded, company operated stores based on historical averages. Note that while above representative examples are based on historical data, there is no guarantee that these results will occur in future. (1) Includes approximately $40,000 in Year 1 for vendor funds collected upon store opening (2) Store 4-wall profitability divided by net store investment (3) Reflects midpoint of respective ranges and excludes additional market level costs or cannibalisation Sources: MFRM Investor Presentation (June 2016) 4 EXAMPLE: NEW STORE INVESTMENT EXAMPLE: NEW STORE RESULTS (1) STORE 4WALL PROFITABILITY DRIVES IMPROVING LEVERAGE OVER MARKET-LEVEL COSTS AS STORE PENETRATION INCREASES ($000) Average investment Buildout and equipping costs 202 Floor sample inventory 25 227 Less: Tenant reimbursement (41) Cash requirement, net 186 ($000) YEAR 1 YEAR 2 Sales 900 - 950 950 1 000 % Growth 0 10 % Store 4Wall profitability (2) 217 229 % of sales 22 25% 22 25% Annual cash on cash return(3) 117% 123%
EXPAND STORE BASE into new markets and grow in underpenetrated markets 4 500 potential stores in the US REAL ESTATE OPTIMISATION review in process RELOCATIONS upon maturity DRIVE STORE VOLUMES and margins through: accessories, foundations, private label/exclusives Supported by national advertising and branding DISTRIBUTION NETWORK is a unique competitive advantage LEVERAGE multiple unique e Commerce properties INTEGRATE with store network and sales associations MANAGEMENT HAS OUTLINED AN ACHIEVABLE GROWTH PLAN FOR THE BUSINESS 19 Source: MFRM Investor Presentation (June 2016) 5 THERE REMAINS SIGNIFICANT RUNWAY FOR STORE EXPANSION, AND REALISATION OF BENEFITS FROM BEING A NATIONAL RETAILER OMNI CHANNEL INCREASE store volumes and margins REPOSITION lower volume stores EXPAND store base
LEAD BY AN EXPERIENCED AND ALIGNED MANAGEMENT TEAM 20 Source: MFRM Management presentations 6 EXECUTIVE STEERING TEAM STEVE Stagner KEN Murphy KARRIE Forbes ALEX Weiss EXECUTIVE CHAIRMAN AND CHAIRMAN OF THE BOARD 22 YEARS INDUSTRY EXPERIENCE PRESIDENT AND CHIEF EXECUTIVE OFFICER 18 YEARS INDUSTRY EXPERIENCE CHIEF BUSINESS OFFICER 19 YEARS INDUSTRY EXPERIENCE CHIEF FINANCIAL OFFICER 12 YEARS INDUSTRY EXPERIENCE
Acquisition Overview Salient terms and strategic rationale
SALIENT TERMS OF THE TRANSACTION ACQUISITION OVERVIEW 22 ACQUISITION METRICS Steinhoff to acquire 100% of the outstanding equity interest in MFRM Purchase consideration is $2.4 billion (2.2 billion) equity value, and an enterprise value of $3.8 billion (3.4 billion) including net debt Transaction expected to be accretive from year 1 FUNDING AND SETTLEMENT 100% cash settled Funding structure consists of: Bridge facility of $1,800 million (1,627 million) 2 year term loan of $1,000 million (904 million) 3 year term loan of $500 million (452 million) 5 year term loan of $500 million (452 million) TIMING Transaction is expected to close by or around the end of the third calendar quarter Notes: Currency translations at $1.106: per Oanda as at 5 August 2016
DEAL RATIONALE AND KEY BUSINESS ATTRACTIONS ACQUISITION OVERVIEW 23 MFRM provides an attractive value proposition: Compelling industry dynamics, with long term stability and consistent growth A best-in-class speciality retailer (25% market share1) with a national retail and distribution footprint and leading market position in the US A proven track record of driving profitability, and a strong free cash flow to support growth Opportunity for growth through store expansion, market consolidation and vertical integration A highly experienced and entrepreneurial management team Broader global geographical spread for the combined group, and greater revenue and profit exposure to US dollars creating a natural hedge to the groups sourcing costs Note: 1. Amongst bedding speciality retailers, as per Furniture Today 2015 Bedding Yearbook Source: Extract from MFRM Investor Presentation (January 2016), MFRM Public Lender Presentation (14 January 2016), and MFRM Investor Presentation (June 2016) RATIONALE: The acquisition of MFRM will create one of the worlds largest multi-brand mattress retail distribution networks and facilitate Steinhoffs entry into the US market
ACQUISITION OVERVIEW 24 STEVE Stagner MARKUS Jooste The boards of Steinhoff and our management team are enthusiastic about the opportunities this transaction creates. This transaction will allow Steinhoff to not only to enter the U.S. Market with an industry leading partner and a national supply chain, but it will also expand Steinhoffs global market reach in the core product category of mattresses. The Mattress Firm brand and speciality retail concept are a strong compliment to the Steinhoff group retail brand portfolio in the many geographies where the group operates. The Mattress Firm board believes that the transaction provides significant value to our stockholders through the premium to our share price and the immediate liquidity at closing, while giving Mattress Firm an ideal partner for the future with proven track record in the complete mattress supply chain including the retail and manufacture of mattresses. Steinhoffs management team shares our vision for the growth and expansion of Mattress Firm and, as such, we believe they are the right long-term partner for our customers, employees, suppliers and other stakeholders.
Steinhoffs currency exposure pre-acquisition will become better diversified post acquisition with ~20% of revenue in USD 16,962 Source: Steinhoff pro forma values reflect the last twelve months for the period ending 31 December 2015, adjusted for Pepkor and kika-Leiner annualisation (sourced from 31 December 2015 half year results and Frankfurt listing prospectus). Pro forma EBITDA is based on depreciation and amortisation for the 6 months to 31 December 2015 and annualised (116m x 2 = 232m) added to Operating Profit. Depreciation is allocated on a pro rata basis proportionate to operating profit MFRM revenue, EBITDA and operating profit data reflects the twelve months up to January 2016 plus pro forma Sleepys LTM up to 2 January 2016, adjusted for non-recurring items. USD / Euro currencies have been translated at $1.110:1.00 (the average twelve month exchange rate to 31 Dec 15 per Oanda). PRO FORMA GROUP REVENUE = 17 BILLION ($18.8 BILLION) Europe North America Pacific Rim United Kingdom Africa PRO FORMA OPERATING PROFIT = 1.6 BILLION ($1.9 BILLION) 25 THE COMBINED GROUP WOULD HAVE PRO FORMA SALES OF 17 BILLION AND OPERATING PROFIT OF 1.6 BILLION, WITH GREATER CURRENCY DIVERSIFICATION 1,684 1,996 16 3 306 PRO FORMA EBITDA = 2.0 BILLION ($2.2 BILLION) 64 Note: Reference to Euros includes exposures to eastern European currencies e.g. Polish Zloty that are not part of the Euro common currency zone. Reference to ZAR includes exposures to other African currencies, however may also include some US dollar exposure PRO FORMA REVENUE CURRENCY EXPOSURES 459 1 180 277 928 730 4 601 7 397 14 55 397 1 021 197 AUD: 6.8% GBP: 5.3% ZAR: 33.7% EURO: 54.2% USD: 19.5% AUD: 5.5% GBP: 4.3% EURO: 43.6% ZAR: 27.1% 1,869 16 61 441 1 133 219 million 18,828 1 030 810 5 107 8 211 3 670 2,215 17 71 509 1 310 308 $ million million $ million million $ million
AND MAKES STEINHOFF A TRULY GLOBAL MARKET PLAYER WITH A PRESENCE ON FIVE CONTINENTS Includes Botswana, Lesotho, Namibia and Swaziland. Excludes automotive dealerships and rental outlets Manufacturing facilities 26 R M (2) Australia/New Zealand 478 4 Europe 1 428 10 United Kingdom 472 7 South Africa (1) 4 113 1 Rest of African countries 287 USA 3 594 TOTAL 10 372 22 USA 3 594 Stores 1.5 million m2 UK&EUROPE 1 900 Stores 3.2 million m2 AFRICA 287 Stores 221,000 m2 SA (1) 4 113 Stores 1.9 million m2 AUS/NZ 478 Stores 576,000 m2 Retail countries Manufacturing locations Sourcing countries Sourcing offices Source: Steinhoff International NV. Data as at 31 December 2015
Conclusion
CONCLUSION 28 MFRM provides an attractive value proposition to Steinhoff due to its compelling industry dynamics, strong US market position, a proven profitability track record, the opportunity for further growth, and MFRMs strong management team Platform to enter the North American market The expanded Steinhoff Group will have revenue of ~17 billion (~$19 billion) with greater scale and geographical diversification through its presence on five continents The transaction is expected to be accretive from year one Source: 1. IBIS World RATIONALE: The acquisition of MFRM provides Steinhoff the opportunity to enter the ~$80 billion(1) North American home furniture and bedding retail market in a core product segment mattresses and bedding
SALIENT TERMS OF TRANSACTION 29 STAKE 100% of MFRM PURCHASE CONSIDERATION Equity value of $2.4 billion (2.2 billion) and an enterprise value of $3.8 billion (3.4 billion) including net debt SETTLEMENT 100% cash FUNDING Bridge facility of $1,800 million (1,627 million) 2 year term loan of $1,000 million (904 million) 3 year term loan of $500 million (452 million) 5 year term loan of $500 million (452 million) MANAGEMENT MFRM management expected to continue Steve Stagner to join Steinhoffs Executive Committee SHAREHOLDER APPROVALS Majority of shareholders (by tender) REGULATORY APPROVALS Hart-Scott-Rodino antitrust filing DEAL PROTECTION Deal protections for Steinhoff: Break-up fee 3% No-shop provision Shareholder support agreements Notes: Currency translations at $1.106: per Oanda as at 5 August 2016
Thank you
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