The owner of Silentnight, one of Britain’s biggest bed manufacturers, is preparing to end a controversial 14-year tenure which included settlements with regulators worth tens of millions of pounds.
Sky News has learnt that HIG Europe, which bought Silentnight through an insolvency process in 2011, has appointed bankers at Rothschild to sell the company.
City sources estimated on Monday that the company could be worth in the region of £100m.
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A deal is unlikely to be concluded with a buyer until next year.
When the sale does take place, it will end HIG’s association with a company which found itself at the centre of one of the most contentious private equity deals in the UK for decades.
HIG Europe, which specialises in buying mid-sized companies, acquired Silentnight in 2011 after identifying an opportunity to generate a handsome return if it could strike a deal without the bed-maker’s pension liabilities.
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The private equity group bought a chunk of Silentnight’s debts, put in place new restrictions on its borrowing facilities and then forced it into a restructuring process.
As a consequence of the ensuing cash crunch, KPMG, the accountancy firm, put Silentnight into administration and immediately sold its assets to HIG Europe without its pension scheme.
The deal triggered an investigation by The Pensions Regulator, which used its anti-avoidance powers to pursue the buyout firm for substantial compensation.
The watchdog issued two warning notices, in 2014 and 2016, with HIG Europe seeking a judicial review of the latter.
Its request was rejected, and in 2021 it agreed a £25m settlement with the pensions watchdog.
Although those funds were injected into Silentnight’s pension scheme, the injection was not sufficient to prevent its responsibility for paying pensioners being transferred into the Pension Protection Fund, the industry-funded lifeboat.
“Our case was that HIG used the control that was available under the lending facilities to bring about the unnecessary insolvency of otherwise viable companies that were supporting a [defined benefit] pension scheme,” TPR said at the time of the settlement.
“We would not expect lenders to bring about unnecessary insolvencies, and so we would not ordinarily anticipate targeting them with our powers.
“However, we will be alert to any instance where we believe an unnecessary insolvency is brought about to sever a scheme from its employer and will pursue those cases to appropriate outcomes in accordance with our statutory objectives.”
HIG Europe was not the only party which was hit in the pocket over its conduct in relation to Silentnight.
In 2021, KPMG was fined nearly £13m by the Financial Reporting Council – at the time a near-record sum – for its role in facilitating the bed manufacturer’s pre-pack sale to HIG Europe.
An FRC tribunal also fined the KPMG partner who led the deal, David Costley-Wood, and banned him from holding membership of the accountants’ professional body for 13 years.
KPMG’s restructuring arm in the UK was sold – also in 2021 – to HIG Europe, and rebranded as Interpath Advisory.
The private equity firm is now in the process of initiating a sale process for the business which could value it at about £800m.
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A spokesperson for HIG Europe declined to comment on the appointment of bankers.
