Item 1.01 Entry into a Material Definitive Agreement.
The information provided in Item 2.01 below is incorporated herein by reference.
Item 2.01 Completion of Acquisition or Disposition of Assets.
Completion of the Acquisition of Elite Comfort Solutions, Inc.
On January 16, 2019, Leggett & Platt, Incorporated (“Leggett,” “Company,” “we” or “us”) completed the previously announced acquisition of Elite Comfort Solutions, Inc. (“ECS”) pursuant to the Stock Purchase Agreement, dated November 6, 2018 (the “Purchase Agreement”) whereby Leggett purchased all of the issued and outstanding shares of capital stock of ECS from Elite Comfort Solutions LP (the “Seller”) for cash consideration of approximately $1.25 billion (the “ECS Acquisition”). Reference is made to the Purchase Agreement which was filed asExhibit 2.1 to the Company’s Form8-K on November 7, 2018.
ECS, headquartered in Newnan, Georgia, is a leader in specialized foam technology, primarily for the bedding and furniture industries. With 16 facilities across the United States, ECS operates a vertically-integrated model, developing many of the chemicals and additives used in foam production, producing specialty foam, and manufacturing private-label finished products. These innovative specialty foam products include finished mattresses sold through both traditional and online channels, mattress components, mattress toppers and pillows, and furniture foams. ECS has a diversified customer mix and a strong position in the high-growth compressed mattress market segment. ECS is expected to become a separate business unit and operate within the Residential Products segment. The ECS management team will continue to lead the business. Leggett plans to maintain all 16 of ECS’s facilities.
The Estimated Purchase Price was calculated as $1.25 billion U.S. dollars, (i) plus $.36 million, which was the amount ECS’s Estimated Closing Net Working Capital was greater than $92 million, (ii) plus Estimated Closing Cash of $9.83 million, (iii) minus Estimated Closing Indebtedness of $379.12 million and (iv) minus Estimated Transaction Expenses of $4.51 million, which equates to $876.56 million (each ofEstimated Purchase Price,Estimated Closing Net Working Capital, Estimated Closing Cash, Estimated Closing Indebtedness and Estimated Transaction Expenses as defined in the Purchase Agreement). At the closing of the transactions contemplated by the Purchase Agreement (the “Closing”), Leggett retired the Estimated Closing Indebtedness, paid the Estimated Transaction Expenses, withheld $8 million of the Estimated Purchase Price in escrow to secure the payment of certain post-closing adjustments, and paid the Seller $868.56 million. Seller and certain equity holders of Seller entered into customarynon-compete andnon-solicitation agreements.
The Purchase Agreement contained customary representations, warranties and covenants made by Leggett, Seller and ECS. The representations and warranties did not survive the Closing. Leggett purchased abuy-side representations and warranties insurance policy under which it may seek coverage for breaches of the Seller’s and ECS’s representations and warranties. The representations and warranties insurance policy is subject to certain policy limits, exclusions, deductibles and other terms and conditions.
The assertions embodied in the representations and warranties made in the Purchase Agreement are solely for the benefit of the parties to the Purchase Agreement, and are qualified by information in confidential disclosure schedules that we exchanged in connection with signing the Purchase Agreement. While Leggett does not believe the schedules contain information required to be publicly disclosed, the schedules do contain information that modifies, qualifies and creates exceptions to the representations and warranties in the Purchase Agreement. You are not a third party beneficiary to the Purchase Agreement and should not rely on the representations and warranties as characterizations of the actual state of facts, since (i) they are modified in part by the disclosure schedules, (ii) they may have changed since the date of the Purchase Agreement, (iii) they may represent only the parties’ risk allocation in this particular transaction, and (iv) they may be qualified by materiality standards that differ from what may be viewed as material for securities law purposes. The Purchase Agreement has been referenced to provide you with information regarding its terms. It is not intended to provide any other factual information about Leggett or ECS. Such information about Leggett can be found in other public filings we make with the SEC.
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