Sheela Foam Ltd, which was supposed to fully acquire rival Kurlon Enterprise Ltd, in two tranches for a cash consideration of Rs 3,250 crore, will now be buying the competitor for Rs 2,150 crore in one go, said a person familiar with the deal.
The deal values Kurlon Enterprise at 2.4 times its annual sales, compared to a price to sales valuation of 3.9 times for Sheela Foams, the source said.
Moneycontrol had earlier reported that acquiring Kurlon Enterprise, maker of the Kurl-on brand of mattresses, will help Sheela Foam, known for the Sleepwell brand, nearly double its market share. If this deal materialises, Sheela Foam’s market share in India’s organised mattress segment could increase to 35-40 percent from 20-25 percent.
Sheela Foam’s flagship brands include Sleepwell mattresses, Feather Foam, a pure PU Foam, and Lamiflex, a polyester foam for lamination.
“Sheela Foam has a strong presence in the North and West while Kurlon is in the South And East,” the person added. The deal will also lead to cost benefits and synergies, he added.
Around Rs 900 crore is expected to be added to the listed company’s topline at the consolidated level.
Moreover, as a result of this deal, Sheela Foam will be able to source more raw material — TDI (Toluene Di-Isocyanate) — at lower rates.
“After the deal, combined buying of TDI by Sheela Foam for itself and Kurlon will help the company get a bigger bulk discount,” the person explained. Apart from raw material sourcing, there will be operational synergies at the factory level, coupled with optimisation of capacity utilisation at both companies’ plants.
