HNI Corporation Completes Transformational Acquisition of Steelcase Inc.

Summary of Key Points

• HNI Corporation (HNI) has completed its acquisition of Steelcase Inc. (Steelcase), creating a leading player in the commercial furniture and workspace solutions industry.
• Transaction Structure: The acquisition was executed through a two-step merger, with Steelcase becoming a wholly owned subsidiary of HNI.
• Deal Value: The total estimated preliminary purchase consideration is approximately \$1.92 billion, comprising both cash and HNI stock.
• Former Steelcase shareholders now own approximately 35% of the combined company, while HNI’s former shareholders own about 65%.
• The transaction closed on December 10, 2025.
• Financing: The deal was financed through a combination of new HNI debt facilities, cash on hand, and exchange of Steelcase public notes.
• Significant balance sheet and income statement impacts are expected, including major step-ups in asset values, new goodwill, changes in capital structure, and material pro forma adjustments.

Transaction Details and Financial Impacts

Acquisition Mechanics

HNI completed the acquisition by merging Merger Sub Inc. with Steelcase, followed by a second merger into Merger Sub LLC, making Steelcase a direct wholly owned subsidiary of HNI. The consideration for each Steelcase share consisted of a mix of cash and HNI common stock, with specific treatment for outstanding restricted and performance stock unit awards.

• Cash consideration per Steelcase share: \$7.20.
• Stock consideration: 0.2192 shares of HNI for each Steelcase share.
• Shares issued: 25.2 million new HNI shares as consideration.
• Outstanding restricted and performance-based awards were converted to HNI equivalents for pre- and post-combination service periods.

Pro Forma Balance Sheet Changes

The unaudited pro forma combined balance sheet reveals a significant transformation:

• Total Assets: Rise to \$5,189.5 million, reflecting the acquisition and fair value step-ups.
• Goodwill and Intangibles: Goodwill increases by \$221.2 million to \$1,691.6 million (net), and intangible assets step up by \$520.0 million (total fair value of acquired intangibles: \$590 million).
• Property, Plant & Equipment: Steps up by \$290 million to a combined \$1,146.4 million.
• Net Debt: New borrowings of \$935.9 million, with total long-term debt rising to \$1,710.2 million.
• Equity: Combined shareholders’ equity increases to \$1,769.3 million.

Pro Forma Income Statement Impacts

Nine Months Ended September 27, 2025 (Pro Forma)

• Net Sales: \$4,410.3 million (combined).
• Operating Income: \$223.0 million.
• Net Income: \$143.0 million.
• Pro Forma Basic EPS: \$2.00; Diluted EPS: \$1.93.

Year Ended December 28, 2024 (Pro Forma)

• Net Sales: \$5,687.8 million.
• Operating Income: \$193.0 million.
• Net Income: \$75.5 million.
• Pro Forma Basic EPS: \$1.04; Diluted EPS: \$1.00.

These figures are after substantial one-time transaction costs, step-up amortization, and increased interest expense from new debt.

Key Shareholder Considerations

1. Material EPS Impact: The deal is transformative, with pro forma earnings per share markedly different from historical standalone results due to purchase accounting adjustments, increased amortization, depreciation, and interest costs.
2. Substantial Leverage Increase: HNI’s financial risk profile changes with nearly \$1 billion in new debt, raising long-term debt to \$1.71 billion.
3. Significant Asset Revaluation: Goodwill and intangibles now make up a considerable portion of the balance sheet, reflecting the premium paid and future value expectations.
4. Shareholder Dilution: HNI issues 25.2 million new shares, resulting in approximately 35% of the combined company being owned by former Steelcase shareholders.
5. Sensitivity to Purchase Price Allocation: Amortization and depreciation expense, and thus reported net income, are sensitive to final fair value adjustments. A 10% change in the fair value of definite-lived intangibles or property & equipment would respectively change annual amortization by \$3.4 million and depreciation by \$5.8 million.
6. Complex Integration and Potential Synergies: The pro forma statements do not include any operating synergies or restructuring costs, which could be significant and value accretive (or destructive), pending management execution.
7. Interest Rate and Refinancing Risk: The merged group’s increased leverage and refinancing needs may make it more sensitive to interest rate changes and credit markets.
8. Tax Adjustments: The net tax impact from transaction accounting adjustments is significant (e.g., \$43.7 million for the year ended December 28, 2024).
9. Non-Recurring Transaction Costs: Nearly \$124.5 million in non-recurring acquisition costs, primarily in 2024, directly reduce retained earnings and reported net income.
10. Exchange of Steelcase Public Notes: \$351 million of Steelcase notes were exchanged for new HNI notes with similar terms, leaving \$99 million of Steelcase notes outstanding. These remain unsecured obligations of Steelcase as an HNI subsidiary.

Potential Share Price Impact & Investment Thesis

This acquisition is highly significant and very likely to drive HNI’s share price in the near term and over the medium term, based on:

• Scale and Market Leadership: The combined company is positioned as a leading force in the commercial furniture sector.
• Synergy Potential: While not quantified, the potential for cost and revenue synergies is substantial.
• Leverage and Execution Risk: Investors should be aware of the increased debt load and the importance of successful integration, which may influence credit ratings and market perception.
• EPS Volatility: The high level of non-cash amortization and depreciation expense due to fair value step-ups may depress GAAP net income, but cash flow may be stronger than reported earnings suggest.
• Shareholder Base Change: With 35% of the company now owned by former Steelcase shareholders, trading volumes and investor dynamics may shift.

Conclusion

HNI’s acquisition of Steelcase is a landmark event for both companies and the sector, introducing strategic opportunities and financial risks. Investors should closely monitor future disclosures, especially regarding synergy capture, final purchase accounting adjustments, and leverage management.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should review the full filings and consult with their financial advisors before making investment decisions. Actual results may differ materially due to integration risks, market conditions, and future management actions.

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