Sheela Foam decides to acquire Kurlon for Rs 2,150 crore in one tranche; stock surges ~15%

18 Jul 2023 , 10:06 AM

Sheela Foam Ltd., which has earlier agreed to buy rival Kurlon Enterprise Ltd. in two tranches for an aggregate cash consideration of Rs 3,250 crore, has now decided to pay Rs 2,150 crore in one go, as per the sources.

Following this development, the company’s counter surged as much as 15% to touch an intraday high of Rs 1,369.75.

At around 10.00 AM, Sheela Foam was trading 8.79% higher at Rs 1,291.40 apiece, against the previous close of Rs 1,187.05 on NSE. 

According to the source, Kurlon Enterprise is valued at 2.4 times of its yearly sales, while Sheela Foams has a price-to-sales valuation of 3.9 times.

Sheela Foam, known for the Sleepwell brand, will nearly treble its market share by acquiring Kurlon Enterprise, developer of the Kurl-on brand of mattresses. The potential outcome of this agreement could lead to an increase in Sheela Foam’s market share within India’s organized mattress industry, potentially reaching a range of 35-40%, up from its current standing of 20-25%.

The consolidated topline of the mattress player is likely to increase by around Rs 900 crore. In addition, this agreement will enable Sheela Foam to acquire a greater quantity of raw materials, specifically TDI (Toluene Di-Isocyanate), at lower prices.

Sheela Foam dominates the north and west, while Kurlon has a strong presence in the south and east. The transaction will also result in cost savings and synergies.

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