Mattress Startup Purple Agrees to $1.1B Merger With Publicly Traded Investment Shell Company

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Date of publication: 31 August 2020
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Mattress Startup Purple Agrees to $1.1B Merger With Publicly Traded Investment Shell Company
Synopsis
Brothers Tony (left) and Terry Pearce founded Purple, and will have a stake worth an estimated $850 million in it after the merger.
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Utah-based Purple will become the first publicly traded mattress startup when it completes a merger with a publicly traded investment shell company at a valuation of $1.1 billion. The deal will make Purple’s founders Tony and Terry Pearce very rich, with a stake in the new entity that Forbes estimates at $850 million.

The Pearces, Mormon brothers with 44 children and grandchildren between them, had come seemingly out of nowhere with their mattress startup since its January 2016 launch, based on technology they had invented. (See Forbes magazine profile, "Mattress Missionaries.")When Forbes visited Purple’s Alpine, Utah headquarters and its giant new factory in rural Tooele county in February, the company had just set up its second, patented Mattress Max machine that can churn out its patented purple-colored hyperelastic polymer. Revenues surged past $50 million in 2016, and are now running at a rate of $187 million (based on second quarter numbers), according to Purple’s investor presentation.

That’s still a pinprick in a $15 billion mattress industry dominated by Tempur Sealy International and Serta Simmons Bedding. But Purple and other buzzy bed-in-a-box competitors, including Casper, Tuft & Needle and Leesa have been grabbing market share as consumers got used to the idea of buying a mattress over the Internet. The Pearces believe that their stretchy, gel-like material, used in the company's mattresses as well as its seat cushions, wheelchair cushions and other comfort technology, gives the company an edge over competitors. “Our objective is to sell $2 billion out of that factory in a few years,” Tony Pearce, 61, told Forbes in February.

The Pearces had been speaking with private-equity firms and venture-capital firms for a long time, looking for investors that could put money into the company and enable its continued fast growth, but had been in no hurry to sign a deal. Neither Tony or Terry Pearce, nor Sam Bernards, the company’s CEO, would speak about the deal today.

Paul Zepf, CEO of Global Partner Acquisition Corp. (GPAC), the publicly traded entity with which Purple is merging, said his group had looked at 75 different companies before agreeing to the Purple deal. Zepf, who had previously worked at Lazard, Morgan Stanley and Golub Capital, took the GPAC shell public in July 2015, and then began looking for acquisition targets. “We wanted a company that would have a good growth profile,” Zepf said. “Purple not only fits that profile, but overall is the best opportunity that we’ve seen.”

After the reverse merger is complete, Purple’s shareholders will own 86% of the public company, which trades on Nasdaq. Earlier this year, the Pearces held 88% of Purple, with employees holding the remainder. Purple’s shareholders will get $90 million in cash in the deal, while the company itself will get some $55 million, which it can put toward its expansion. Building out the giant factory in Tooele in order to get to the company’s hoped-for $2 billion in sales is a major capital project. Bernards, 40, who has an M.B.A. from Brigham Young University and had previously worked for Wal-Mart on the launch of Walmart Express (and is Tony’s nephew by marriage), will remain CEO after the deal is completed.

With a reverse merger, a private company like Purple can become public without doing an initial public offering. With the deal, it will beat Casper – which has raised $240 million in equity and has been talking about an IPO – to the public markets. On news of the deal, GPAC’s shares traded up 1.3%, to $10.09, giving the acquisition shell a market cap of $196 million. The deal is expected to close in the fourth quarter.

Forbes.com