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Why Mattress Firm Holding Corp Stock Skyrocketed Today

By Steve Symington - Aug 8, 2016 at 1:46PM

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The mattress retailer is being acquired for a hefty premium. Here's what investors need to know.

Image source: Mattress Firm Holding Corp

What: Shares of Mattress Firm Holding Corp. (NASDAQ: MFRM) were up 114.2% Monday after the mattress retailer announced it has agreed to be acquired.

So what: More specifically, Mattress Firm has entered into a definitive agreement to be acquired by South Africa-based household goods and furniture retailer Steinhoff International Holdings for $64 per share in cash. That offer represents a total equity value for Mattress Firm of approximately $2.4 billion, an enterprise value of approximately $3.8 billion (including net debt), and a 115% premium over Mattress Firm's closing price on Friday.

Now what: The transaction is still subject to regulatory approvals, and is expected to close some time in the third quarter of this year. But in the end, considering the enormous premium the offer represents -- and unless waiting to sell between now and the transaction's close would result in more favorable long-term capital gains tax treatment -- I think Mattress Firm shareholders would be wise to take Monday's profits off the table and put them to work elsewhere.

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