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In December 2012, Potpourri Group, Inc. – a portfolio company of American Capital Ltd. (ACAS - Analyst Report) – acquired Cuddledown, Inc., a major multi-channel retailer of high-end bedding related merchandise. American Capital invested in Potpourri Group, back in 2005.

Founded in 1973, Yarmouth, Maine-based Cuddledown vends high-quality synthetic and down-filled comforters, pillows, sheeting as well as sleepwear.

Potpourri is a well-known multi-brand direct marketer, offering wide-ranging products in distinctive home furnishings, casual apparel, gifts and unique accessories online as well as through catalogues.

The merger is going to be a positive step for Potpourri since Cuddledown boasts diverse mix of products and has proficiency in the high-end bedding business. It will provide Potpourri the prospect to flourish in the bedding-product segment as well.

Management at Potpourri has considerable expertise in effectively integrating different brands into its portfolio, resulting in organic revenue growth and significant expense savings.  The amalgamation of Cuddledown is further anticipated to add to Potpourri’s future growth due to its similar consumer base and wide product range.

American Capital is a publicly-traded private equity firm and global asset manager. Directly and through its asset management business, the company initiates, underwrites and manages investments in middle-market private equity, leveraged finance, real estate and structured products.

American Capital is capable of providing flexible financing solutions ranging from a variety of senior debt and uni-tranche to mezzanine and equity co-investments. Further, American Capital provides multi-currency funding with underwriting platform globally, thereby boosting its portfolio companies. Such benefits provided by the company compel private equity clients to consider it as an investment partner, which in turn, helps it diversify.

Though the improved portfolio performance is expected to continue with the economic recovery, we believe that the low interest rate environment along with global cues might act as headwinds in the upcoming quarters.

Shares of American Capital currently retain a Zacks #4 Rank, which translates into a short-term Sell rating. Among its peers, KCAP Financial, Inc. (KCAP - Snapshot Report) retains a Zacks #1 Rank (Strong Buy).

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