2016 Postmortem
Related: About this forumMitt's Mattress Massacre
How Mitt Romneys Bain harvested Sealy mattress company - Sealy was America's No. 1 mattress brand -- until Bain Capital got its hands on it; By Josh Kosman, Salon.comAt Wednesday nights presidential debate Mitt Romney will no doubt brag about how, as head of Bain Capital, he built businesses.
On his website, Romney says, In addition to Staples, Bain Capital went on to help launch or acquire Dominos Pizza, Sealy, Brookstone, and The Sports Authority.
However, as of last week hed be unwise to cite Sealy, once Americas biggest mattress brand.
Relative upstart Tempur-Pedic agreed to buy Sealy this week for $2.20 a share, paying less than $250 million for its stock and assuming its $750 million debt.
Sealy executives told me this week that Tempur-Pedic, with its memory foam beds, is like the Starbucks of the bedding industry, and there was no stopping its rise. But thats not the full story.
Mitt Romneys Bain led a $791 million buyout of Sealy in 1997, putting $140 million down and, in typical private-equity fashion, having Sealy borrow the remaining $651 million to finance the deal and assume responsibility for paying it back.
Companies like Bain Capital call themselves private equity firms, but as I explained in my book The Buyout of America they really provide no equity. They make money by putting businesses at risk. They say they turn struggling businesses around. But Sealy was not a turnaround it was the market leader in its sector.
Romney first tried to boost Sealys profits, so it could pay its debt, by acquiring one of Sealys biggest retail customers, Mattress Discounters. But MD expanded too quickly and went bankrupt.
Bain then pushed Sealy to design the no-flip, or one-sided, bed. To cut costs they eliminated the bottom cover, making the bottom simply a foundation. With two-sided beds, consumers can flip their mattress, like they rotate a tire, for longer wear, so getting rid of the bottom would shorten the life of the mattress.
But Bain was more interested in cutting costs and boost short-term profits than in providing value to consumers. For a while, it didnt seem to matter. Bain and co-investors sold harvested, if you like Sealy in 2004 to fellow private equity firm KKR for $1.5 billion, pocketing $741 million for its $140 million investment
more at: http://www.salon.com/2012/10/02/how_mitt_romneys_bain_harvested_sealy_mattress_company/
cleduc
(653 posts)central scrutinizer
(11,609 posts)Jennicut
(25,415 posts)Why anyone think he would be good economically is beyond me.
tanyev
(42,278 posts)Figures.
Blue Owl
(49,739 posts)Just walking through the place you can tell they do everything to cut corners.
NCLefty
(3,678 posts)and await the arrival of the mattress police
aletier_v
(1,773 posts)pdxDemocrat
(37 posts)So . . . Bain put $140 million down on a $791 million buyout of Sealy in 1997 then sold Sealy to KKR in 2004 for $1.5 billion, pocketing $741 million. Who can fault Bain or Romney for that? If KKR thought it was worth $1.5 billion and paid it, kudos to Bain.
I'd rather go blind than see Romney as President. Bain and Romney shafted a lot of employees in plenty of deals by sucking out the resources and bankrupting the companies, but as I see the Sealy deal, they simply bought low and sold high.
Donkees
(30,998 posts)They're taking away mattress choice and trying to give us nightmares!