Sleepwell owner Sheela Foam to buy rival Kurlon Enterprise for Rs 3,250 cr
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Sleepwell mattresses' owner Sheela Foam will acquire rival company Kurlon Enterprise, buying 100 per cent of the company in two tranches for a cash consideration of Rs 3,250 crore, reported Moneycontrol.
The transaction is expected to be completed within the next few months, it added.
According to the report, acquiring Kurlon Enterprise will help Sheela Foam nearly double its market share.
If this deal goes through, Sheela Foam's market share in India's organised mattress segment could rise to 35-40 per cent from 20-25 per cent.
"Sheela Foam has a strong presence in the north and west, while Kurlon is in the south and east," said a person familiar with the deal. adding that the deal will result in cost savings and synergies.
Around Rs 900 crore is expected to be added to the listed company’s topline at the consolidated level.
Furthermore, as a result of this deal, Sheela Foam will be able to obtain more raw materials, such as TDI (toluene di-isocyanate), at lower prices.
"After the deal, the combined buying of TDI by Sheela Foam for itself and Kurlon will help the company get a bigger bulk discount," the person said.
Aside from raw material sourcing, there will be operational synergies at the factory level, as well as capacity utilisation optimisation at both companies' plants, he added.
Mattress market in India and its growth.
In India, there are numerous branded and non-branded mattress companies. Branded players account for only 40 per cent of the overall Indian modern mattress market. In the branded market, there are 25 players, with Sleepwell and Kurlon holding dominating shares.
The mattress market in India was estimated to be worth $1.7 billion in FY19, and it is expected to more than double to $2.8 billion by FY24.
The share of organised, branded mattress industry's market increased from 29 per cent in FY14 to 35 per cent by FY19, and is expected to reach 40 per cent by FY24.
According to industry estimates, India's total mattress market is around 18.6 million units, with new demand at around seven million units per year.
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