Sheela Foam to now buy Kurlon Enterprise for Rs 2,150 crore
Sheela Foam Ltd, a company engaged in the manufacturing of foam-based products, had previously announced plans to acquire its rival, Kurlon Enterprise Ltd, in two stages, with a total cash consideration of Rs 3,250 crore. However, according to a person familiar with the deal, the acquisition will now be executed in a single transaction amounting to Rs 2,150 crore.
The acquisition involves Sheela Foam Ltd purchasing Kurlon Enterprise Ltd, thereby consolidating its position in the market. The exact details and reasons behind the change in the acquisition structure have not been provided in the information provided.
Sheela Foam Ltd’s decision to acquire Kurlon Enterprise Ltd indicates its strategic intent to expand its market presence and potentially gain a competitive edge. By combining the resources, expertise, and customer base of both companies, Sheela Foam Ltd aims to strengthen its market position and explore new growth opportunities.
The acquisition of Kurlon Enterprise Ltd by Sheela Foam Ltd presents an opportunity for the latter to significantly increase its market share in the organized mattress segment. Sheela Foam, renowned for its Sleepwell brand, aims to almost double its market share through this deal. If the acquisition materializes successfully, Sheela Foam’s market share in India‘s organized mattress segment could rise from the current 20-25 percent to 35-40 percent.
The deal is valued at 2.4 times Kurlon Enterprise’s annual sales, indicating the price-to-sales valuation. In comparison, Sheela Foam is currently valued at 3.9 times its annual sales. This suggests that Sheela Foam is acquiring Kurlon Enterprise at a relatively lower valuation based on its annual sales.
By bringing Kurlon Enterprise, the manufacturer of the popular Kurl-on brand of mattresses, under its umbrella, Sheela Foam aims to leverage the strengths of both companies. This strategic move is expected to provide synergies, combining the expertise, resources, and customer base of both organizations. The objective is to create a stronger market presence and explore growth opportunities in the competitive mattress industry.
Sheela Foam Ltd, as a prominent player in the mattress industry, boasts several flagship brands. The first is Sleepwell, known for its wide range of mattresses. Sleepwell mattresses have gained recognition and popularity among consumers for their comfort and quality.
In addition to Sleepwell, Sheela Foam offers Feather Foam, which is a pure polyurethane (PU) foam product. Feather Foam is known for its versatility and is widely used in various applications, including cushioning, insulation, and packaging.
Another key brand offered by Sheela Foam is Lamiflex. Lamiflex is a polyester foam specifically designed for lamination purposes. It is often used in industries such as furniture manufacturing and automotive upholstery.
According to the source, Sheela Foam has a strong market presence in the North and West regions of India, while Kurlon Enterprise, the company being acquired, has a significant presence in the South and East regions. This regional complementarity suggests that the acquisition will enable Sheela Foam to expand its market reach and consolidate its position as a leading player in the mattress industry across the country.
Apart from market expansion, the deal is expected to result in cost benefits and synergies. By integrating the operations, resources, and distribution networks of Sheela Foam and Kurlon Enterprise, the combined entity can potentially achieve economies of scale, optimize production processes, and enhance overall operational efficiency. These cost benefits and synergies can contribute to the long-term success and profitability of the merged company.
The acquisition of Kurlon Enterprise Ltd by Sheela Foam Ltd is expected to have a positive impact on the consolidated financials of Sheela Foam. It is projected that around Rs 900 crore will be added to Sheela Foam’s consolidated topline, indicating an increase in overall revenue.
Additionally, the deal will enable Sheela Foam to enhance its sourcing capabilities for a crucial raw material, TDI (Toluene Di-Isocyanate). With the acquisition, Sheela Foam will have the advantage of procuring TDI at lower rates. By combining the purchasing power of both companies, Sheela Foam can negotiate better prices and obtain bulk discounts for TDI, leading to cost savings and improved profitability.
The integration of operations between Sheela Foam and Kurlon Enterprise will also result in operational synergies at the factory level. This means that by streamlining processes, eliminating duplications, and optimizing resource allocation, the merged entity can achieve operational efficiencies and cost reductions. Such synergies can contribute to improved productivity, reduced expenses, and enhanced overall performance.
Furthermore, the deal presents an opportunity for the optimization of capacity utilization at the plants of both companies. By effectively utilizing the combined production capacities, the merged entity can maximize output, reduce idle capacity, and improve overall manufacturing efficiency. This optimization of capacity utilization will likely lead to cost savings and higher profitability for the consolidated company.
