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Leggett & Platt To Acquire Elite Comfort Solutions For $1.25 Bln - Quick Facts

Diversified manufacturer Leggett & Platt Inc. (LEG) said Wednesday that it has entered into a definitive agreement to acquire Elite Comfort Solutions, Inc. or ECS for $1.25 billion in cash. The transaction, approved by the Board of Directors of Leggett & Platt, is expected to close in January 2019.

Following the closing of the transaction, ECS will become a separate business unit and operate within the Residential Products segment. The ECS management team will continue to lead the business.

ECS, a portfolio company of Arsenal Capital Partners, is a provider of specialized foam technology primarily for the bedding and furniture industries.

ECS's annual sales for the fiscal year ended September 30, 2018 were $611 million. With 16 facilities across the U.S. ECS operates a vertically integrated model, producing specialty foam. Leggett & Platt plans to maintain all 16 of ECS's manufacturing and warehousing facilities.

Leggett noted that ECS is expected to generate double-digit sales growth and strong EBITDA margins that should be accretive to company average margins. Due to impacts from purchase accounting, ECS is expected to have a slightly negative effect on consolidated EBIT margins.

For modeling purposes, in 2019, Leggett anticipates net interest expense of about $90 million, fully diluted shares of 136 million, and an approximate 23 percent tax rate. Including these factors, the ECS acquisition is expected to be neutral to earnings per share in 2019 and accretive beginning in 2020.

Karl Glassman, President and Chief Executive Officer of Leggett & Platt, said, "Through the combination of Leggett & Platt and Elite Comfort Solutions, we will become the leading provider of differentiated products for the bedding industry and gain critical capabilities in proprietary foam technology, along with scale in the production of private-label finished mattresses."

Leggett & Platt said it plans to fund the acquisition through the expansion of its commercial paper program and related revolving credit agreement. In addition, the company plans to enter into a $500 million 5-year term loan with its current bank group.

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