NEW YORK Simmons Co, maker of the Beautyrest mattress and other bedding products, has filed for bankruptcy protection and expects to be sold to two buyers in a transaction valued at roughly $760 million.
Private equity firm Ares Management LLC and the Teachers' Private Capital unit of the Ontario Teachers' Pension Plan, which together own rival mattress maker Serta, will buy Atlanta-based Simmons in a prepackaged reorganization plan.
Simmons filed for Chapter 11 protection on Monday with the U.S. bankruptcy court in Delaware, and expects to emerge within 60 days. It said the filing did not include its Canadian and Puerto Rican businesses, and would not affect daily operations.
The 139-year-old company is now owned by private equity firm Thomas H Lee Partners LP THL.UL, which acquired it in 2003 in a $1.1 billion transaction. Ares and Teachers' Private Capital would become Simmons' seventh owner in 24 years.
Sales have slumped for mattress makers as the weak economy caused consumers to spend less on big-ticket items. Simmons has also struggled with higher raw material and fuel costs.
Simmons said it had $900 million of assets and $1 billion of debt as of Sept 26. It said the reorganization plan would let it reduce debt to about $450 million, and has won approval from nearly all lenders and bondholders.
The company had been negotiating with lenders and creditors since late 2008 after missing financial targets required under a loan associated with the 2003 buyout.
Several other companies in the mattress industry have also filed for bankruptcy this year, including Dial-A-Mattress Operating Corp, the operator of the 1-800-Mattress retailer; Consolidated Bedding Inc, which makes Spring Air Mattresses; and Foamex International Inc, a maker of polyurethane foam.
Ares and Teachers' Private Capital are expected to operate Simmons and Serta separately. The two brands would have a combined market share larger than current leader Sealy Corp ZZ.N, according to research firm IBISWorld Inc.
Affiliates of private equity firm Kohlberg Kravis Roberts & Co KKR.UL held 50.9 percent of Sealy as of August 30.
According to court records, Simmons' senior bank lenders and suppliers would be paid in full; holders of Simmons Bedding Co notes would get up to 85.7 cents on the dollar; holders of notes at the holding company would get up to 5.6 cents on the dollar, and most equity holders would get nothing.
Miller Buckfire & Co and law firm Weil, Gotshal & Manges LLP are advising Simmons. Goldman Sachs & Co (GS.N) and law firm Sullivan & Cromwell LLP are advising the buyers.
The case is In re Simmons Bedding Co, U.S. Bankruptcy Court, District of Delaware, No. 09-14036.
(Reporting by Ajay Kamalakaran in Bangalore and Jonathan Stempel in New York; Editing by Greg Mahlich and Lisa Von Ahn)