Mattress Firm operates more than 2,300 brick-and-mortar retail locations and an e-commerce platfom. After the Tempur Sealy acquistion is complete, the two companies will have a total of some 3,000 retail stores, 30 e-commerce platforms, 71 manufacturing facilities and four research and development facilities worldwide.
"This combination will accelerate our growth trajectory and enhance operating cash flow," Tempur Sealy Chairman and CEO Scott Thompson said in a statement. "Mattress Firm has been a valued retail partner for more than 35 years, and we look forward to welcoming their talented workforce of more than 8,100 employees to the Tempur Sealy family."
Mattress Firm CEO John Eck added that the transaction will increase the companies' ability "to better address consumers’ needs and drive growth."
Tempur Sealy will pay about $2.7 billion in cash and $1.3 billion in stock to Mattress Firm, which is partially owned by Steinhoff International Holdings NV. That reflects the issuance of 34.2 million common shares, based on Monday's closing share price of $37.62.
After the transaction is complete, Mattress Firm shareholders will own about 16.6% of the combined company and Tempur Sealy shareholders will own the rest.
A person wears a face mask outside Mattress Firm store near Union Square as the city continues Phase 4 of re-opening following restrictions imposed to slow the spread of coronavirus on September 24, 2020 in New York City. (Photo by Noam Galai/Getty
The companies expect to complete the transaction in the second half of 2024. After the acquistion is complete, Mattress Firm is set to operate as a separate business unit within Tempur Sealy.
Tempur Sealy received a request frm the Federal Trade Commission for additional information and documents related to the transaction. The company plans to "work cooperatively" with the FTC to complete the acquistion.
Piper Sandler said in a note Tuesday the prospect of Tempur Sealy acquiring Mattress Firm "has been discussed for many, many months within the industry." The investment banking and research firm expects a long FTC review process, noting that the transaction marks a "seismic deal for the mattress industry."
Neil Saunders, managing director of data analytics company GlobalData, said selling Mattress Firm has been a "priority" for Steinhoff as the parent company looks to pay down debt.
Saunders added that the deal will allow Tempur Sealy to expand its distribution and reach more consumers at a crucial time for increasing sales.
"Tempur Sealy will also hope that Mattress Firm helps them to buck the current slowdown in sales which is being caused by the cost-of-living crisis and many households having upgraded their mattresses during the pandemic," Saunders said.
But the full impact of the acquistion is still unknown. Saunders points to the high purchase price and other challenges retailers like Mattress Firm face today — including the disruption from a "raft of specialist new entrants to the market, most of which sell directly to consumers" and "pressure from the expansion of home players like IKEA."
While Mattress Firm and Tempur Sealy have a long history as retail partners, the two have had a rocky relationship in recent years. The companies temporarily ended their partnership in January 2017 — in a move that notably removed popular Tempur-Pedic beds from Mattress Firm stores.
The following year, in August 2018, Tempur-Pedic sued Mattress Firm for allegedly "selling confusingly similar products under the ‘Therapedic’ name, and copying the look and feel of the entire Tempur-Pedic brand and consumer experience." Tempur-Pedic also accused Mattress Firm of continuing to sell Tempur-Pedic mattresses beyond the 2017 end of their partnership.
In October 2018, Mattress Firm filed for Chapter 11 bankruptcy protection and closed hundreds of stores. At the time, the Houston-based company pointed to years of overexpansion that resulted in "cannibalization" of sales. Mattress Firm’s then-CEO Steve Stagner later resigned in April 2019.
Months after Stagner's resignation, Tempur Sealy and Mattress Firm reconciled with a new, long-term supply agreement.
In addition to announcing plans to acquire Mattress Firm on Tuesday, Tempur Sealy also reported a first-quarter profit of $85.3 million, or 48 cents per share. Ecluding one-time items, earnings were 53 cents per share.
The Kentucky-based mattress maker said revenue slipped 2.5% to $1.21 billion from $1.24 billion.