- Acquisition of one of Canada's
leading online mattress retail brands
- Secures positioning in the accelerating online mattress
segment
- Stronger ability to compete with U.S. and international
entrants
- High-quality, 'Made in Canada'
mattress
- Innovative brand backed by best-in-class digital marketing
& ecommerce expertise
- Endy will continue to operate separately
- Attractive purchase price and immediately accretive to EPS
TORONTO, Nov. 29, 2018 /CNW/ - Sleep Country Canada
Holdings Inc. ("Sleep Country" or "Sleep Country Canada") (TSX:
ZZZ), Canada's leading sleep
provider, today announced that it has signed a definitive agreement
to acquire Endy ("Endy"), widely recognized as one of Canada's biggest mattress-in-a-box ecommerce
players.
TWO GREAT CANADIAN SLEEP BRANDS JOIN FORCES
"Together,
Sleep Country and Endy, two great Canadian brands will provide the
most convenient customer experience to a wider base of Canadian
consumers shopping for a better night's sleep. We recognize that
consumer shopping habits are evolving and we remain focused on
serving our customers any way they want to shop, and providing them
with the choice to navigate easily between traditional and online
channels," said David Friesema, CEO
of Sleep Country.
"The acquisition of Endy will, along with Sleep Country's
existing ecommerce and Bloom mattress-in-a-box offerings,
complement Sleep Country's national store footprint and diverse
selection of sleep products. In line with our strategic growth
objectives and commitment to customer service, this acquisition
accelerates growth of our online business and demonstrates our
continued innovation and passion to provide Canadians with a great
night's sleep," added Friesema.
ENDY EXPLODES ONTO THE ECOMMERCE SCENE
Endy, launched
in 2015, is one of Canada's
fasting-growing startups and an innovator in the Canadian ecommerce
space.
Following three years of significant growth, Endy was named
Canada's fastest growing retail
company on the 2018 Startup 50 list, compiled by Maclean's
and Canadian Business. The company has achieved this
explosive growth while taking on very minimal external
investment.
The brand's award-winning Endy Mattress has changed the way
Canadians sleep. Engineered to offer the perfect balance of comfort
and support, the Canadian-made Endy Mattress ships for free to
every province in a box the size of a hockey bag. Designed to
relieve pressure points, eliminate motion transfer, and release
body heat faster than conventional foam, Endy has grown to become
one of the leading online mattress brands in Canada.
Endy's expanded assortment includes The Endy Pillow, The Endy
Sheets, and The Endy Mattress Protector.
With thousands of 5-star customer reviews, Endy has built a
brand based on customer obsession and product innovation. Over the
past three years, countless influential athletes, olympians, and
notable Canadians have turned to Endy as their sleep surface of
choice. This high-profile list includes the brand's first external
investor, former Toronto Blue Jays star Jose Bautista, who announced his investment in
the company this past August.
The brand's mission -- to help all Canadians get a better
night's sleep -- extends beyond its customers. Endy has donated
thousands of mattresses since launch to families and individuals in
need across the country. To learn more about the company's charity
partnerships and mattress donation program, visit
endy.com/socialmission.
"Endy's original founders Rajen
Ruparell (Chairman) and Mike
Gettis (CEO), two best friends from Calgary whose vision and drive built and
supported the talented Endy team, will remain at the helm of the
business, alongside all of their existing employees. Their
mission will remain the same, which is to continue to grow their
Canadian business while harnessing the passion of their
entrepreneurial culture in this very competitive industry," said
Friesema.
The Sleep Country and Endy businesses will be run separately,
encouraging the competitive entrepreneurial spirit that has
positioned them both as leaders in their respective spaces.
Mike Gettis will continue to be
Endy's CEO. General oversight of the Endy business will be provided
by a board comprised of the senior management of Sleep Country and
Endy. Rajen Ruparell will Chair this
board.
"We are thrilled with today's announcement and extend a very
warm welcome to the entire Endy team," said Stewart Schaefer, Chief Business Development
Officer at Sleep Country. "The company's leadership demonstrates
entrepreneurship at its finest. Endy is a true Canadian success
story, growing by over 150% year over year in 2018, while remaining
profitable. Endy has built strong customer loyalty and a relevant
Canadian brand in just three short years, positioning itself as one
of the market leaders in a very competitive ecommerce space. We
have watched and admired Endy's growth for the last three years and
respect the work they have done to build and grow their business.
Over the last 3 years, we have seen the competitive intensity in
the U.S. grow with over 150 players in the space. We believe
Endy will position us strongly as "Best-in-Class" in Canada to compete against local and U.S.
entrants," added Schaefer.
"We launched Endy as a disruptor in the Canadian ecommerce space
three years ago, and this announcement today is a testament to the
incredible dedication of the entire Endy team," said Rajen Ruparell, co-founder and Chairman of Endy
and the company's majority shareholder. "This acquisition will
allow us to continue to grow rapidly and exceed customer
expectations in a rapidly evolving retail climate, while remaining
separate."
"Since starting Endy, our mission has been to help all Canadians
get a better night's sleep," said Mike
Gettis, co-founder and CEO of Endy. "After getting to know
the Sleep Country team, we can think of no better partner to help
us achieve the dream we set out to accomplish when we founded Endy.
By remaining a deeply rooted Canadian company, we can continue to
scale our business and raise the bar even further as champions for
our customers."
SLEEP COUNTRY'S GROWTH STORY
Over the past 24 years, Sleep Country's mission has been to exceed
their customers' expectations when shopping for mattresses and
bedding essentials.
With a national footprint from coast to coast, Sleep Country has
built a network of 264 conveniently located stores to service their
customers' needs plus 16 strategically located distribution centres
across Canada to provide a fast
and convenient white glove home delivery service.
The over 900 highly trained Sleep Experts add to Sleep Country's
personalized in-store experience, by offering unparalleled product
knowledge and service to help each shopper choose the right
combination of products that best suit the way they sleep.
Today, with the very exciting announcement of the acquisition of
Endy, one of Canada's leading
mattress-in-a-box retailers, Sleep Country once again redefines the
bedding industry by creating one of the most unique partnerships
that this industry has ever seen, positioning Sleep Country at the
forefront of this rapidly evolving industry.
"We are very proud of our continued focus on providing our
customers with the best service by matching customers to relevant,
innovative and high quality brands. We just celebrated our
21st consecutive quarter of same store sales growth,"
said Schaefer.
From 2013 to the trailing twelve months ended Q3 2018 topline
sales for Sleep Country grew 75% from $353.9
million to $617.6 million,
while Operating EBIDTA grew 168% from $39.4
million to $105.6 million.
"Acquiring Endy is the next step in our journey to ensure that
we diversify our offering and continue to grow and tap into a new
generation of sleepers," added Schaefer.
TRANSACTION DETAILS
Sleep Country has agreed to acquire substantially all of the assets
of Endy for $88.7 million. Sleep
Country will pay $63.7 million in
cash at closing and has agreed to pay up to an additional
$25 million in cash in early 2021
based on achieving certain growth and profitability targets in
2020.
The transaction will be financed through Sleep Country's
revolving credit facility, which will be upsized by $60 million to $210
million for the transaction. Pro forma total debt to EBITDA
at closing is anticipated to be approximately 1.5x.
The $63.7 million paid at closing
of the transaction represents approximately 12.0x Endy's trailing
12 month EBITDA as of October 31,
2018. If the full $25 million
earn-out payment is made in 2021, the future implied acquisition
multiple for 2020 will be below 9x EBITDA based on the total
purchase price of $88.7 million.
"Furthermore, because of the strength of our balance sheet, our
financial leverage will still be at relatively conservative
levels," indicated Robert Masson,
Chief Financial Officer of Sleep Country Canada.
Subject to customary closing conditions, the transaction is
expected to close on December 6,
2018.
TD Securities Inc. acted as exclusive financial advisor to Sleep
Country Canada. Davies Ward Philips
& Vineberg LLP served as legal counsel to Sleep Country Canada
and Dentons Canada LLP served as legal counsel for Endy.
CONFERENCE CALL
Sleep Country Canada CEO, David
Friesema, Stewart Schaefer,
Chief Business Development Officer, Robert
Masson, Chief Financial Officer, and Endy Chairman
Rajen Ruparell will host a
conference call for analysts and investors on November 30, 2018 at 8:30
a.m. (ET). The dial-in numbers for the conference call are
(888)231-8191 (toll free North
America dial-in number) or (647)427-7450 (international
dial-in number). This conference call will be recorded and
available for replay until December 7,
2018. To listen to the replay, please dial (855)859-2056 or
(416)849-0833 and use passcode 2899387.
About Sleep Country
Sleep Country is Canada's leading sleep retailer. Sleep Country
operates under two retail banners: Dormez-vous, the largest
retailer of mattresses in Quebec
and Sleep Country Canada, the leading mattress retailer in the rest
of Canada. As of November 29, 2018, Sleep Country has 264 stores
and 16 distribution centres across Canada. All of the Company's stores are
corporate-owned, enabling it to develop and maintain a strong
culture of customer service, resulting in a consistent and superior
in-store and home delivery customer experience.
About Endy
Launched in 2015 and headquartered in
Toronto, Endy (endy.com) is
revolutionizing the way people sleep, through their ridiculously
comfortable, supportive and Canadian-made mattress. Engineered to
offer the perfect balance of comfort and support, The Endy Mattress
is made with an open air cell foam that relieves pressure points,
eliminates motion transfer, and releases body heat faster than
conventional foam. With free shipping across Canada in a box the size of a hockey bag, it's
easy to see why Endy has become one of the leading online mattress
brand in Canada, with the most
Canadian 5-star reviews. As one of Canada's fastest growing ecommerce companies
and winner of the 2016 Techweek Top 100 Innovator Award, Endy has
expanded its assortment to include The Endy Pillow, The Endy
Sheets, and The Endy Mattress Protector. Endy was also named
the fastest growing retail startup on the 2018 Startup 50 list by
Maclean's and Canadian Business. The brand also works
closely with Canadian charities to donate new and gently used
mattresses to families and individuals in need.
Non-IFRS Measures
This news release makes
reference to certain measures that are not recognized under IFRS
and do not have a standardized meaning prescribed by IFRS.
They are therefore unlikely to be comparable to similar measures
presented by other companies. These measures are provided as
additional information to complement IFRS measures by providing
further understanding of the Company's results of operations from
management's perspective. Accordingly, they should not be
considered in isolation nor as a substitute for analysis of the
Company's financial information reported under IFRS. The
Company uses non-IFRS measures including "Same Store Sales" or
"SSS", "EBITDA", "Operating EBITDA", "Adjusted Net Income" and
"Adjusted Earnings Per Share" to provide investors with
supplemental measures of its operating performance and thus
highlight trends in its business that may not otherwise be apparent
when relying solely on IFRS financial measures. The Company
also believes that securities analysts, investors and other
interested parties frequently use non-IFRS measures in the
evaluation of issuers. The Company's management also uses
non-IFRS measures in order to facilitate operating performance
comparisons from period to period, to prepare annual operating
budgets and forecasts and to determine components of management
compensation. For a reconciliation of these non IFRS measures refer
to the Company's MD&A for Q3 2018 which is available on SEDAR
at www.sedar.com.
Forward-Looking Information
Certain information
in this news release contains forward-looking information and
forward-looking statements which reflect the current view of
management with respect to the Company's objectives, plans, goals,
strategies, outlook, results of operations, financial and operating
performance, prospects and opportunities. Wherever used, the words
"may", "will", "anticipate", "intend", "estimate", "expect",
"plan", "believe" and similar expressions identify forward-looking
information and forward-looking statements. Forward-looking
information and forward-looking statements should not be read as
guarantees of future events, performance or results, and will not
necessarily be accurate indications of whether, or the times at
which, such events, performance or results will be achieved. All of
the information in this news release containing forward-looking
information or forward-looking statements is qualified by these
cautionary statements.
Forward-looking information and forward-looking statements are
based on information available to management at the time they are
made, underlying estimates, opinions and assumptions made by
management and management's current good faith belief with respect
to future strategies, prospects, events, performance and results,
and are subject to inherent risks and uncertainties surrounding
future expectations generally. Such risks and uncertainties
include, but are not limited to, those described in the Company's
2017 annual information form (the "AIF") filed on March 1, 2018. A copy of the AIF can be accessed
under the Company's profile on SEDAR at www.sedar.com.
Additional risks and uncertainties not presently known to the
Company or that the Company currently believes to be less
significant may also adversely affect the Company.
Readers are urged to consider the risks, uncertainties and
assumptions carefully in evaluating the forward-looking information
and forward-looking statements and are cautioned not to place undue
reliance on such information and statements. The Company does not
undertake to update any such forward-looking information or
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by applicable
laws.
SOURCE Sleep Country Canada Holdings Inc. Investor Relations