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Herman Miller Inc. and Knoll Inc. said Monday they have agreed to combine in a cash-and-stock deal valued at $1.8 billion that will create a leader in modern design for the office and home just as the pandemic has companies reimagining office life and workers investing in work-from-home stations.
“This highly complementary combination will create the pre-eminent leader in modern design, catalyzing the transformation of the home and office sectors at a time of unprecedented disruption,” the companies said in a joint statement.
Knoll shares
KNL,
soared 34% on the news in heavy volume, with 19.4 million shares changing hands by early afternoon, or more than 72 times the average daily volume over the past 30 days. Herman Miller shares
MLHR,
slid 11%.
Under the terms of the deal, Knoll shareholders will receive $11 in cash and 0.32 share of Hermann Miller for each Knoll share owned. Based on Herman Miller’s five-day volume weighted average price of $43.94 per share, the deal implies a purchase price of $25.06 per share, equal to a premium of 45% over Knoll’s closing price on Friday.
Once the deal closes, current Herman Miller shareholders will own about 78% of the combined entity, while Knoll shareholders will hold abut 22%. The deal is expected to close by the end of the third quarter.
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As part of the deal, Herman Miller will purchase all of Knoll’s outstanding preferred stock from Investindustrial VII L.P. for a fixed cash consideration of $253 million, or $25.06 per each underlying share.
Herman Miller and Knoll have 19 leading brands, a presence in more than 100 countries, a global dealer network, 64 showrooms around the world, more than 50 retail locations and a strong e-commerce network.
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The combined company would have pro forma annual revenue of about $3.6 billion. The deal is expected to boost Herman Miller’s cash earnings per share in the first 12 months after the deal’s close and to generate $100 million of cost synergies within two years.
“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,” said Andi Owen, Herman Miller’s chief executive. “At the same time, consumers are making significant investments in their homes.”
See also: Herman Miller’s struggles with weaker Q2 sales
On a conference call with analysts, Owen said she expects the deal to “shape the future of our industry as a whole” and leave the companies well-positioned to drive long-term growth.
“Herman Miller produces the world’s bestselling office chair. Knoll manufactures the world’s most recognizable table. Between us, we’ve innovated furniture made with molded plywood, tubular steel, metal wire injected from a pellicle,” she said.
Owen is to remain CEO of the combined company, while Knoll CEO and Chairman Andrew Cogan, is slated to depart. Under Cogan’s leadership, Knoll, founded by Hans G. Knoll and his architect and designer wife Florence Knoll in 1938 and headquartered in East Greenville, Pa., has received the National Design Award for Corporate and Institutional Achievement from the Smithsonian’s Cooper-Hewitt, National Design Museum.
Herman Miller, founded in 1905 and based in Zeeland, Mich., will fund the deal with a combination of new debt and cash on hand, and has a commitment from Goldman Sachs for $1.75 billion of senior secured revolving and term loan credit facilities.
Herman Miller shares have gained 93% in the last 12 months, while the S&P 500
SPX,
has risen by 45%. Knoll shares, having traded as low as the vicinity of $10 in the early days of the COVID-10 pandemic, are up 140% in the past year.
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