Tempur Sealy is buying Mattress Firm for $4 billion

Tempur Sealy International said on Tuesday it would buy retailer Mattress Firm in a cash-and-stock deal valued at about $4 billion, as the leading U.S. bedding maker looks to stem a post-pandemic decline in sales.

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 their home furnishings.

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. The deal would give the combined company a footprint of about 3,000 stores globally

Earlier this year, Mattress Firm said it was continuing to explore all options for the business after withdrawing plans to go public.

Regulatory speed bump?

The companies, however, expect to close the deal only by the second half of 2024, with analysts anticipating a lengthy review by regulators.

Tempur Sealy said it had received a request for additional information and documentary material from the Federal Trade Commission (FTC). Negotiations with the FTC are in the “early innings”, Tempur Sealy executives said in an earnings call.

The firms also submitted a Hart-Scott-Rodino filing, or a pre-merger notification, with regulators back in October, given the uncertain regulatory environment.

“In the current environment … it has become difficult when you try to negotiate a deal as to understand how much FTC risk you have, because it’s different than what it has been historically,” Tempur Sealy CEO Scott Thompson told Reuters.

“(The early filing helps) get a flavor of the initial reaction and make sure you understand where there might be issues.”

The companies believe they can ultimately clear the process either traditionally or through litigation and said they were considering all options to ensure closing, including store divestitures.

The merger agreement includes a $50 million break-up fee for FTC issues and a maximum store divestiture limit, Thompson said.