Nov 15, 2021 - Economy

Casper to be sold in private equity deal

Illustration: Aïda Amer/Axios

Casper is retreating from the public market, barely two years after its entrance.

Catch up quick: Private equity firm Durational Capital Management is taking the mattress company private in a deal announced Monday.

Why it matters: Companies face less scrutiny when they are private and can more easily pivot when making operational decisions, analysts say.

Context: Mattress companies have been a magnet for PE firms, at times with disastrous outcomes.

  • “There's been a lot of key interest [because] of the high margins and really good cash flow,” Seth Basham, equity analyst at Wedbush, tells Axios.
  • Tempur Sealy is expected to end the year with a 45% gross margin, according to a KeyBanc report. Sleep Number is projected to see 61%.

By the numbers: Durational Capital’s offer will provide shareholders a 94% premium to Casper’s stock price Friday and give the company financial relief amid its growing losses.

Yes, but: Casper’s valuation has plummeted from a high of over $1 billion in the private markets in 2019 to just under $150 million as of last week.

The intrigue: One possible reason for the high premium on the deal "The buyers see value and likely wanted to offer enough to get the other shareholders to vote in favor of the deal," Basham says.

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