In the last few weeks Mattress Firm has been beaten up and left for dead by some stock analyst out there. Some claiming that Mattress Firm has nowhere to go but down, and that the value of the company was well below the current stock price which was about $30 at the time. For people with no long term view that might be true, but not for Markus Jooste and the Steinhoff Company.
I met Markus a few years ago when I was working at Leggett and Platt and it didn’t take long for me to realize that he was a master deal maker with great integrity and is a first rate business man. Not to blow too much smoke here but if you ever have the chance to be around Markus I think you will understand what I am talking about. In my opinion he is one of the few visionaries left in the mattress/furniture industry. Markus sees what he wants and he goes after it aggressively which is exactly what he has done in this case. The question is, did he make a good deal?
People have been calling me non-stop since the announcement on Sunday to discuss the big news of the Mattress Firm buyout at 115% of their stock price. If you look at Mattress Firm today in their current state and then try to reconcile the price Steinhoff paid, you might have some trouble justifying the number. If your Markus, you see things not as they are but instead, how they could be. Once you do that and consider their past success, it becomes more clear.
Steinhoff has proven over and over that it understands how to run retail AND supply their own companies with goods that they make. These guys have several retail formats from mattress stores, to furniture stores to mass discount retail. To be successful in all formats and grow to over 10,000 retail outlets, it takes more than luck. They get it.
I have heard Markus talk about how good his own management team is and how important it is to have a solid management team in place when he looks at companies to buy. Knowing the Mattress Firm leadership, it is no surprise that the two companies mesh perfectly when it comes to culture. So when you pay that kind of premium to buy a company I think it says a lot about Steinhoff’s opinion of what the Mattress Firm management team can do and how far they can take the business under the right ownership structure. (On that note, I don’t know of another company that could max out the upside to the MFRM purchase like Steinhoff can and will.) The good news is, they are not going to be the only ones to benefit from this deal.
As for the industry, I think it is a HUGE win for us as well. We have a new player in the United States market that has a big passion for BUILDING companies, not for buying them and bleeding them out. They understand what it means to be successful and to deliver a great product and experience to the consumer. If our largest mattress retailer is now owned by a company with a long term view, I would make an argument that this rising tide could lift all boats.
I have had a chance to meet several people in the Steinhoff organization so if you are reading this I say congratulations! Steinhoff bought the right retailer and you are now part of one of the most dynamic mattress markets on the planet. You guys have built a world class organization and now represent the worlds largest mattress distribution organization. Well done; we are very glad to have you.
As for the Mattress Firm… most of you don’t know Markus or his team yet but trust me when I say, you should be very glad that you are now in the Steinhoff family of companies. You have built the first coast to coast mattress retailer in the United States and have been highly criticized over the last 3 months by some on the sidelines. People have shorted your stock in a significant way, betting against you and your ability to produce a result. Well, consider this your 3 point shot at half court to win the game. Many of us are very happy for what this means to your organization and your ability to focus on what is important; selling beds. Congratulations to you all.