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Purple adopts poison pill

Illustration of hand holding offering a bag of money to another hand, which is refusing the offer.

Illustration: Rae Cook/Axios

Purple Innovation, a maker of polymer gel mattresses, adopted a poison pill in response to Coliseum Capital Management's unsolicited $4.35-per-share takeover offer, the company said.

Why it matters: The offer comes as mattress companies have begun to see a slowdown in overall demand against a difficult macroeconomic environment.

  • Purple also formed a special committee to evaluate the proposal, which would value the company's equity at nearly $395 million.

Of note: Coliseum already holds a 45% stake in Purple Innovation, according to an SEC filing.

Details: The committee appointed to review the offer is comprised of independent directors Gary DiCamillo, Claudia Hollingsworth, Paul Zepf and Dawn Zier.

  • Purple noted that the committee "has not reached any conclusion as to the advisability or feasibility of a potential transaction at this time."

State of play: During the midst of the pandemic, mattress stocks achieved all-time highs as consumers spent heavily on home improvement — but have since seen significant dips.

  • In Q1 2021, Sleep Number was trading at above $143 per share and Purple passed $36 per share.
  • Since then, both stocks have slid to a fraction of that. Monday, Sleep Number and Purple closed at $34.08 and $3.89, respectively.
  • In the late summer of 2021, Tempur Sealy was trading above $46 per share but closed Monday at $24.54.
  • Casper reported record revenue in Q2 last year, with sales up in North America 45% year over year, only to sell to Durational Capital Management in November after hemorrhaging cash.

Context: According to Piper Sandler's August mattress retailer survey, total dollar sales growth during the month declined by a mean of 11%, while total unit sales decreased by a mean of 17%.

Catch up fast: Purple acquired Intellibed in an all-stock transaction this month, expanding the acquirer's distribution capabilities and product offerings.

By the numbers: Purple has cash and cash equivalents of about $41 million and debt of about $37 million, according to its latest 10-Q filing with the SEC.

  • It had a poor Q2, with net revenue falling about 21% to approximately $144 million.
  • The company's stock was up about 7% Tuesday, to $4.17 per share.

The bottom line: Now doesn't seem like a bad time for Purple to consider its options.

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