Tempur Sealy to Purchase Mattress Firm

Largest mattress maker inks deal with largest mattress retailer

Andy Kriege YSN

Tempur Sealy International Inc. (TSI) announced last week that it would buy retailer Mattress Firm in a cash-and-stock deal valued at about $4 billion. TSI, the leading U.S. bedding manufacturer, is seeking to bolster sales that have been declining since the pandemic ended. Mattress Firm, part-owned by Steinhoff International Holdings NV, is among the biggest bedding retailers in the U.S., with more than 2,300 brick-and-mortar store locations. 

Mattress Firm, with around $4.2 billion in annual sales, would operate as a separate business unit within Tempur Sealy, and Tempur Sealy’s board would expand to include two Mattress Firm directors. The pairing of these two titans would give the combined company a footprint of about 3,000 stores, 30 e-commerce platforms, 71 manufacturing facilities, four R&D facilities and 21,000 employees.

The transaction, which includes repaying Mattress Firm’s debt, is expected to close by the second half of 2024, with analysts anticipating a lengthy review by regulators. TSI executives noted on an earnings call that it had received a request for additional information and documentary material from the Federal Trade Commission (FTC) and that negotiations are in the “early innings.” The companies believe they can ultimately clear the process either traditionally or through litigation and said they were considering all options to ensure the deal closes, including store divestitures.

The sale came as no surprise to industry analysts as TSI has been engaged in talks to buy Mattress Firm, (which filed for Chapter 11 bankruptcy in 2018) for at least two years. Tempur Sealy shares (TPX) rose 5% immediately after the deal was announced but have since retreated and are now below the pre-announcement share price. 

In 2022, Mattress Firm attempted to raise funds via an initial public offering under majority owner Steinhoff International. The company then paused those plans earlier this year due to market volatility and continued to explore other “strategic options,” including the pending merger with TSI.

Mattress companies have struggled in recent quarters from an easing in demand following the explosive growth seen during the early months of the pandemic when consumers upgraded furnishings throughout their homes. In 2022, sales of units were down 17.9% compared to 2021 according to an Insider story published in BedTimes. Compounding the sales challenges are rising costs at the retail level that are outstripping the cost of inflation. The same story also noted that the fourth-quarter average unit price for U.S.-produced mattresses and foundations rose by 15.5%.

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