The merger of Stearns & Foster Co. with Ohio Mattress Co., formerly Ohio-Sealy Mattress Manufacturing Co., has been approved by the shareholders of both companies.
The move puts Ohio Mattress among the nations largest manufacturers of sleep products.
Under the terms of the merger agreement, Ohio Mattress will operate Stearns & Foster as a wholly owned subsidiary, continuing to use the Stearns trade name for at least 20 years. At the same time, Ohio-Sealy, which is the largest licensee of Sealy Inc., will be operated as a subsidiary as well.
While Ohio Mattress executives have begun meeting with Stearns & Foster key personnel in preparation for the transition, no major changes in Stearns’ operations have been announced. However, HFD has learned that Phillip D. McManus, who has served as Stearns & Foster’s president and chief executive officer since May 1982, will relinquish his positions to pursue other interests once the transition is complete.
McManus joined Stearns & Foster as a director in 1977. Before being named president, he was chairman and chief executive officer of McDonough Co., the Parkersburg, W. Va.-based diversified conglomerate.
Approval of the merger by Stearns & Foster shareholders came despite some earlier efforts to block the move on the part of several Stearns family members who control a majority interest. Although the family members initially urged shareholders to delay their approval in hopes of attracting a better offer, they altered their opposition after efforts were convince them the Ohio Mattress proposal would be beneficial.
According to McManus, Stearns & Foster shareholders approved the merger by a 97 percent majority. “Those in opposition removed their opposition,” he said, adding, “It’s rather clear they supported the deal also.” McManus noted, “The minority didn’t feel it was approprirate to hurt the majority.”
Under the initial terms of the agreement, Stearns & Foster shareholders will receive shares of Ohio Mattress common stock valued at $48.6 million, based upon Ohio Mattress’s common stock closing price as of last Aug. 19. The aggregate consideration to be paid is subject to limited adjustments, reflecting fluctuations in the price of Ohio’s common stock.
Ohio Mattress’s volume is about $79 million, including its acquisition last year of Monterey, a waterbed company. Stearns & Foster does about $95 million, bringing the total volume of the newly-merged company to $174 million.
Stearns & Foster, which also makes convertible sofas and textiles, is known primarily for its unusually well made mattresses that fall at the upper reaches of the industry and that are distributed primarily through department stores. Ohio-Sealy, on the other hand, manufactures and markets bedding at extremely competitive prices, and does much of its business with sleep shops and furniture chains.
Industry observers give Ohio Mattress chairman Ernest M. Wuliger credit for the merger on two counts: One, it enables him to cover both ends of the market, giving him a good spread of risk, and, two, it enables the highly aggressive Ohio Mattress to grow at a time when its expansion via Sealy, Inc. plants has effectively been blocked. Several executives suggest Wuliger is pursuing other acquisition candidates in the bedding industry.
What undoubtedly made Stearns & Foster a desirable acquisition candidate for Ohio Mattress, besides its distribution network and reputation for quality, was its recent financial turnaround: After two years of troubles, the company reportedly whowed a healthy profit last year.
While the company’s results are not made public, Stearns & Foster is expected to show an unusually steep increase in operating earnings for the first nine months of its fiscal year, according to a Stearns & Foster executive.