Purple Innovation Inc. (NASDAQ:PRPL) may see other bidders after its largest holder Coliseum Capital offered to buy the mattress company, though likely Coliseum will ultimately have to raise its bid, according to Truist. Purple jumped 42% on the offer.
“Ultimately, we believe a deal will happen, but Coliseum may have to raise their offer to complete this,” Truist analyst Keith Hughes wrote in a note on Monday.
The only possible strategic bidder for Purple (PRPL) would be Tempur Sealy (TPX), though the lack of near-term EBITDA would likely “stretch” the balance sheet at TPX to get a deal done, Hughes wrote.
A few private equity firms already invested in the industry may also be interested in Purple (PRPL), “but the lack of EBITDA probably knocks out many other private equity firms, the substantial ownership of Coliseum will likely discourage many bidders, in our view,” Hughes added.
Coliseum submitted a non-binding offer to acquire all of the common stock it doesn’t already own for $4.35/share on Saturday, according to a 13D/A filing. The offer represents a 56% premium to Purple’s (PRPL) closing price on Friday. Coliseum owns 40.8m shares, or a 45% stake in PRPL.
Purple (PRPL) confirmed in a statement that it received the Coliseum offer and said its board will carefully review the proposal to determine the course of action that it believes is in the best interest of Purple and its shareholders.