Furniture maker acquires retailer for $154M
An office furniture giant is growing its higher-margin consumer business by acquiring the largest premium furniture retailer in North America for $154 million in cash.
Herman Miller in Zeeland said yesterday that it’s entering into an agreement to acquire Design Within Reach, or DWR, in Stamford, Conn., a retailer of modern designer furniture, lighting and accessories.
Founded in 1998, DWR is the largest and fastest-growing retailer of Herman Miller’s furniture designs, with an established online presence, print catalog and 38 retail studio locations across North America.
Pending regulatory approval, the agreement is scheduled to close on July 28, with Herman Miller acquiring 84 percent ownership interest in DWR and receiving estimated future tax benefits reaching a present-day value of $10 million.
The leadership at DWR is expected to continue leading the consumer retail unit upon completion of the acquisition, with their remaining ownership interest in the retailer converted to a roughly 8.5 percent ownership stake within Herman Miller’s new consumer business segment.
Per the agreement, Herman Miller's acquisition price is subject to adjustment for net debt, changes in working capital and potential post-closing items.
DWR’s shareholders are expected to receive roughly $23 per share, on a fully diluted basis, due to the acquisition, while an escrow account is anticipated to be established to satisfy post-closing obligations borne solely by the largest DWR shareholders, according to Greg Bylsma, chief financial officer, Herman Miller.
Brian Walker, chief executive officer at Herman Miller, siad that while there will be immediate strategic benefits gained by both organizations, earnings accretion will be modest in the fiscal year ending June 2015, due to the impact of the one-time acquisition costs and required purchasing accounting adjustments.
Walker said the acquisition of DWR “expands our reach in the higher-margin consumer sector” and will “benefit our other segments and operations.”
“The addition of DWR is a transformational step forward in realizing our strategy for diversified growth and establishing Herman Miller as a premier lifestyle brand, helping people create inspiring places where they work, live, heal and learn,” Walker said. “In addition to enhancing Herman Miller’s brand visibility, we gain access to DWR’s growing and exclusive portfolio and proven development capabilities.
“We are acquiring a complete consumer-focused infrastructure and an experience and committed leadership team and workforce that truly values Herman Miller’s design legacy. That leadership team will skillfully advance our consumer business, while DWR gains new resources to further their growth plans.”
John Edelman, chief executive officer at DWR, and John McPhee, president of DWR, said in a shared statement the partnership between the two organizations will enable DWR to accelerate its mission to make great, authentic modern design accessible.
“We are thrilled to be joining the Herman Miller family. We’ve worked closely with the company and its leadership for many years and have great respect for their approach to business and people. We represent a portfolio of the greatest modern design from around the world. We are excited to continue this journey with the resources and energy of Herman Miller behind us.”
The legal advisor for DWR was Ellenoff Grossman & Schole, while the financial advisor was Financo for the acquisition agreement between DWR and Herman Miller.
Herman Miller reported approximately $1.9 billion in revenue for the fiscal year 2014.
The furniture maker operates facilities in more than 100 countries.