Sheela Foam to Acquire Kurlon Enterprise: An In-depth Analysis

1. Acquisition Details: Sheela Foam Ltd has announced its plans to fully acquire its rival, Kurlon Enterprise Ltd. The acquisition will be completed by buying 100% of the company in two separate transactions, amounting to a total cash consideration of Rs 3,250 crore. The deal is expected to be concluded within a few months​. 2. Impact on Market Share The acquisition of Kurlon Enterprise is poised to significantly boost Sheela Foam's market share. Currently, Sheela Foam holds a market share of 20-25% in India's organized mattress segment. Post-acquisition, it is expected to nearly double, raising the market share to 35-40%​. 3. Geographic and Operational Synergies Sheela Foam, known for its Sleepwell brand, has a strong market presence in the North and West of India. On the other hand, Kurlon, known for the Kurl-on brand of mattresses, is established in the South and East. The merger of these two firms will not only broaden their geographic reach but also lead to cost benefits and operational synergies, enhancing their overall efficiency​. 4. Financial Impact The merger is expected to add around Rs 900 crore to the topline of the listed company at the consolidated level. Moreover, Sheela Foam will be able to source more of the raw material TDI (Toluene Di-Isocyanate) at lower rates due to combined buying for both companies, leading to significant cost savings. Operational synergies at the factory level are also expected, along with the optimization of capacity utilization at both companies' plants​. 5. Response from the Companies As of now, both Sheela Foam and Kurlon have not responded to queries about the possible deal​. 6. Indian Mattress Market Overview The mattress market in India, dominated by a few branded and many non-branded companies, was worth around $1.7 billion in FY19. It is expected to more than double to $2.8 billion by FY24. The share of the organized, branded mattress industry grew from 29% of the market in FY14 to 35% in FY19 and is expected to reach 40% by FY24. The total market for mattresses in India is estimated at around 18.6 million units, with new demand at around 7 million units per year​. 7. Valuation of Kurl-On Enterprise Share As per the FY22 Balance Sheet, the total outstanding shares are 3.65 Cr. Based on this, the per-share value is calculated to be 890 per share. This valuation provides an additional lens to evaluate the financial implications of the acquisition. https://unlistedzone.com/shares/buy-sell-share-price-kurlon-enterprise-limited-unlisted-shares/