Herman Miller acquiring furniture designer Knoll for $1.8B

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Herman Miller is acquiring the Pennsylvania-based furniture design firm Knoll.

The Zeeland-based furniture manufacturer Herman Miller (Nasdaq: MLHR) said Monday that it entered into a definitive agreement with East Greenville, Pennsylvania-based Knoll Inc. (NYSE: KNL) under which Herman Miller will acquire Knoll in a cash and stock transaction valued at $1.8 billion.

The transaction, which has been unanimously approved by the boards of directors of both companies, is expected to close by the end of the third quarter of calendar year 2021, subject to the satisfaction of closing conditions.

Under the terms of the agreement, Knoll shareholders will receive $11 in cash and 0.32 shares of Herman Miller common stock for each share of Knoll common stock they own. Based on Herman Miller’s five-day, volume-weighted average price of $43.94 per share, the transaction terms imply a purchase price of $25.06 per share, representing a 45% premium to Knoll’s closing share price on April 16. Upon completion of the transaction, Herman Miller’s shareholders will own about 78% of the combined company, and Knoll shareholders will own about 22%.

In connection with the closing of the transaction, Herman Miller will purchase all of the outstanding shares of Knoll’s preferred stock from Investindustrial VII LP for a fixed cash consideration of $253 million, representing an equivalent price of $25.06 for each underlying share of Knoll common stock. Investindustrial has entered into a voting agreement to vote in favor of the transaction at the special meeting of Knoll shareholders to be held in connection with the transaction.

The companies are seeking to forge a combined entity that is “a leader in modern design, catalyzing the transformation of the home and office sectors at a time of unprecedented disruption.”

Herman Miller and Knoll collectively have 19 brands, a presence across over 100 countries worldwide, a global dealer network, 64 showrooms globally, more than 50 physical retail locations and global multichannel e-commerce capabilities.

The combined company will have pro forma annual revenue of about $3.6 billion and pro forma adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of about $552 million, based on each company’s respective last reported 12 months and including the anticipated $100 million of cost synergies, implying adjusted EBITDA margins of about 16%.

Andi Owen Mitch Ranger

“This transaction brings together two pioneering icons of design with strong businesses, attractive portfolios and long histories of innovation,” said Andi Owen, president and CEO of Herman Miller. “As distributed working models become the new normal for companies, businesses are reimagining the office to foster collaboration, culture and focused work while supporting a growing remote employee base. At the same time, consumers are making significant investments in their homes. With a broad portfolio, global footprint and advanced digital capabilities, we will be poised to meet our customers everywhere they live and work. Together, we will offer a deep portfolio of brands, technology, talent and innovation to create meaningful growth opportunities in all areas of the combined business.”

Andrew Cogan, Knoll’s chair and CEO, said the deal “validates the strategic direction and our success in building a preeminent constellation of design-driven brands and leaders and is a testament to the achievements of the entire Knoll team in bringing a contemporary perspective to how we work and live.”

“We believe this combination offers significant benefits to our shareholders, clients, dealers and associates,” Cogan said. “Our shareholders will receive immediate and certain value, as well as future upside potential through ownership in an industry leader with significant growth opportunities. Our clients, the design community and dealers will have access to an expanded, exceptional portfolio of brands through enhanced channels. And our associates will benefit as part of a larger and more diversified company with a shared design legacy.”

Owen added, “In addition to driving value for Herman Miller and Knoll shareholders, dealers and customers will benefit from a broader combined portfolio that will deliver beauty, joy, efficiency and utility. The transaction will also create enhanced opportunities for employees across both organizations. Herman Miller and Knoll both have cultures guided by values that support problem-solving design and doing well by doing good, and these shared beliefs will contribute to a smooth integration.”

Following the close of the transaction, Owen will serve as president and CEO of the combined company. Cogan plans to depart upon closing of the transaction after a successful 30-year career with Knoll, during which time the company received the National Design Award for Corporate and Institutional Achievement from the Smithsonian’s Cooper-Hewitt National Design Museum.

“I want to thank Andrew for his partnership in reaching this agreement and recognize his outstanding dedication to Knoll during its many years of success,” Owen said. “Knoll thrives today as a result of Andrew’s dedication to its founders’ commitment to good design. In the process, he has built an organization and brand portfolio dedicated to design leadership, operational excellence, digital innovation and customer experience, building on the storied Knoll heritage and pioneering the development of groundbreaking products. We look forward to welcoming Knoll’s incredibly talented team.”

Goldman Sachs & Co. LLC is serving as financial adviser to Herman Miller, and Wachtell, Lipton, Rosen & Katz is serving as legal adviser.

BofA Securities is serving as financial adviser to Knoll, and Sullivan & Cromwell is serving as legal adviser.

Herman Miller expects to fund the cash portion of the transaction with a combination of new debt and cash on hand. It has obtained a commitment from Goldman Sachs for over $1.75 billion of senior secured revolving and term loan credit facilities, subject to customary conditions. The transaction is not conditioned on financing.

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