Purple Pops 39% As Coliseum Capital Comes Courting With $4.35/Share Takeover Offer

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Analysts say Purple’s better suited to operate a a private company, but long time owners likely unhappy with bid.

Shareholder Coliseum Capital Management LLC said Monday in a 13D filing with the US Securities & Exchange Commission that it offered $4.35 a share, or a total of $225.6 million, to buy the balance of mattress maker Purple Innovation (NASDAQ:PRPL) it doesn’t already own.

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Purple To Review Coliseum Capital's Offer

Purple confirmed the nonbinding offer from its largest shareholder and said in a prepared statement, "The Purple Board of Directors will carefully review the proposal to determine the course of action that it believes is in the best interest of Purple and all Purple shareholders." 

Coliseum Capital is a Connecticut-based hedge fund founded in 2005 by Christopher Shackelton and Adam Gray. The hedge fund owns approximately 49% of PRPL's total share count, equating to 40.85 million shares.

While the offer represented a 56% premium to PRPL's Friday closing price, it is 67% below PRPL's $13.27 at the end of 2021.

UBS analyst Atul Maheswari believes the implied transaction revenue multiple of 0.6x FY23 estimates is fair, despite the group's potential to improve its balance sheet. 

Atul said as a private company, Purple would be more nimble and have an easier time operating its supply chains and managing strategy. UBS remains 'neutral' on the stock but raised its price target to $4.35, even with Coliseum's bid.

Matt Koranda from Roth Capital Partners noted the offer's healthy premium, with the caveat that longtime shareholders had cost bases well above the bid and are not eager to sell.

Roth remains 'neutral' on the stock.

Fintel's insider accumulation score of 90.91 is bullish on the company as it ranks PRPL in the top 2% of 14,547 screened constituents. The score is calculated by ranking companies with a combination of the net number of insiders buying stock and the total shares purchased as a percentage of float.

Over the past 90 days, PRPL has had two net insiders that have purchased shares on the market.

The first was the group's Chief People Officer, Jack Roddy, who acquired 2,000 shares at $2.74, bringing his total share count to 14,000.

The second was by director Gary DiCamillo, who purchased 10,000 shares at $2.66 per share on average and increased his total share count to 113,083. 

Article Ben Ward, Fintel