Advent sells Chinese mattress maker to Hillhouse

The size of the transaction was not disclosed. Mergermarket, AVCJ’s sister title, reported in April that Advent was running a dual-track IPO and trade sale process, with the expectation of achieving a valuation of $1 billion. The private equity firm acquired King Koil from CITIC Capital in 2016 for $150 million and then initiated a tie-up with Serta, a US-based portfolio company.

Advent claims to have helped AI Dream to evolve from a single brand into a multi-brand platform, while growing the store network from 300 outlets to more than 2,300 in mainland China and Hong Kong and forming partnerships with 1,300 luxury hotels and resorts. It also invested in innovations such as smart sleep products, and in retail channel expansion and consumer-centric branding.

The GP started exploring China’s mattress retail market in 2012 on acquiring AOT Bedding Super Holdings, the parent of Serta Simmons Bedding, which was one of the top players in the US. King Koil China, founded in 2000, was the leading local player a premium segment dominated by global names. It is the exclusive licensee for brands such as King Koil, Aireloom, and Life Balance.

CITIC moved faster and picked up a controlling stake in the company in 2014. “When we saw that CITIC Capital had acquired King Koil China we thought we had missed the opportunity. Then in 2016 when CITIC proposed to exit, we were already fully prepared and jumped at the chance quickly,” Andrew Li, a managing director and co-head of Greater China at Advent, told AVCJ in 2018.

CITIC had already helped the company develop its retail presence, with the offline store count rising nearly fivefold to 330 and online sales growing tenfold. By 2016, two-thirds of King Koil China’s sales were B2C; previously hotels accounted for the bulk of revenue.

Advent continued to drive this transition and brought together King Koil China and Serta China – the exclusive local licensee for Serta-branded products – through a joint venture. At the time, Serta China was controlled by a Hong Kong bedding provider, with Serta Simmons holding a minority interest. Advent ended up buying the business outright and merging it with King Koil China to form AI Dream.

The businesses were seen as a good fit: Serta China had a strong offline presence with more than 1,400 Serta outlets nationwide, while King Koil China had the best penetration rate in terms of online sales of premium mattresses.

“After becoming an integrated business through the combination of Serta and King Koil, which themselves enjoy a strong presence in over 100 countries, AI Dream has continued to go from strength to strength and is now one of the largest players in China’s premium mattress market,” Li said in a statement marking the exit.

Wei Cao, a partner at Hillhouse, added that China’s mattress market has huge growth potential, driven by a health-conscious middle class that is increasingly willing to pay a premium for high-quality sleep products. The private equity firm will leverage its expertise in supply chain management and digital enablement to support existing management in taking the business forward.

Hillhouse previously demonstrated its expertise in this area with Belle International, a Chinese footwear retailer it privatized in 2017 in partnership with CDH Investments. There was an emphasis on implementing new retail capabilities, for example switching supply chains to a just-in-time model with a cloud-based inventory.

UBS and Deutsche Bank served as financial advisors to Advent on the AI Dream sale.

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• Topics
• Greater China
• Trade sale
• Buyouts
• Consumer
• China
• Advent International
• Hillhouse Capital Management
• manufacturing