Knight Said in Talks to Obtain New Capital

The Knight Capital Group was in talks on Sunday with a consortium of companies including TD Ameritrade and Getco over a possible injection of capital that would help stabilize the embattled trading firm, a person briefed on the discussions told DealBook on Sunday.

The firm is seeking to secure the investment before trading opens on Monday, this person said, adding that talks are ongoing and may still fall apart. It has been racing to secure enough capital to keep the lights on after disclosing a $440 million loss on Thursday, one tied to an error in its trading software that affected the stock prices of more than 140 companies.

The market maker and its advisers have been in talks with a number of potential suitors and investors since late last week, hoping to secure enough capital to stay afloat and avert a need to file for bankruptcy. Among the options that it had been seeking were selling off pieces of its businesses and taking on new investors.

Some of those potential suitors have walked away, however. The Citadel Investment Group ended its look at Knight on Saturday, according to a second person briefed on the sales process, citing potential regulatory concerns. And other possible investors, including Kohlberg Kravis Roberts, had decided early on not to pursue any deals with the company.

The potential investment from the TD Ameritrade and Getco consortium could prove costly to existing investors, however, as it is likely to come in the form of financial instruments that would dilute existing shareholders, the person briefed on the discussions with the consortium said.

The last four days have proved a roller-coaster experience for Knight's employees. Shares in the trading company plunged 75 percent on Wednesday and Thursday, following the disclosure of the trading error and the accounting charge. Some of the firm's biggest trading customers, including the Vanguard Group, TD Ameritrade and E*Trade Financial, st opped routing client orders to Knight on Thursday as they assessed the firm's outlook.

But Knight told trading partners on Friday that it had secured a short-term financial lifeline that allowed it to operate that day, news that helped convince customers like TD Ameritrade and Scottrade to resume doing business with the firm. The news prompted a 57 percent bounce in its shares.

Traders in the firm's Jersey City headquarters clustered around television screens that day, clinging to any scrap of good news, according to Knight employees who declined to be named because they were not authorized to speak publicly.

Jessica Silver-Greenberg contributed reporting.

Advent to Buy Control of Maker of Serta and Simmons Bedding

Advent International said on Sunday that it has agreed to buy a majority stake in the parent company of Serta and Simmons bedding, taking control of one of the country's biggest makers of mattresses.

The deal for AOT Bedding Super Holdings is valued at about $3 billion, according to a person briefed on the matter. Ares Management and the Ontario Teachers' Pension Plan, which previously controlled AOT Bedding, will maintain sizable minority stakes in the company.

Advent outbid at least two other private equity firms, Bain Capital and Berkshire Partners, for AOT Bedding, another person briefed on the sales process said.

“We are excited to be investing in Serta and Simmons, two companies with strong momentum in an industry we believe is poised for growth,” Jefferson Case, a principal at Advent International, said in a statement. “We look forward to working with our investment partners and the management teams of both companies.”

Through Sunday' s deal, Advent will control two mattress makers with a collective history of about 223 years. Based in Hoffman Estates, Ill., National Bedding is the biggest holder of Serta licenses in the country.

Simmons, which was founded in 1870, has passed through a series of investors before filing for bankruptcy in 2009, burdened by the cumulative weight of its multiple takeovers.

Ares and Ontario Teachers gained control of National Bedding in 2005. The two later gained control of Simmons in 2010, buying the company out of bankruptcy. Since then, the two mattress brands have been run as separate subsidiaries and continued to compete against each other.

Founded in Boston 28 years ago, Advent has become a particularly notable investor in consumer companies in recent years. Among its investments are Party City and the athletic clothing maker Lululemon Athletica.

Advent was counseled by the law firm Weil Gotshal & Manges. AOT Bedding was advised by Barclays, Deuts che Bank, Morgan Stanley and the law firm Sullivan & Cromwell.