Tempur Sealy International has signed a definitive agreement to acquire Mattress Firm in a stock-and-cash deal valued at about $4 billion, the companies said in a press release Tuesday.
About $2.7 billion of cash consideration includes the repayment of Mattress Firm's debt and other items. Based on 34.2 million shares of common stock at Monday’s closing share price of $37.62, $1.3 billion in stock will be issued to Mattress Firm shareholders.
The deal is expected to close in the second half of 2024, subject to customary closing conditions, including regulatory approvals. At that point Mattress Firm would operate as a separate business.
Mattress Firm earlier this year ditched plans to go public, citing “ongoing volatility” in the IPO market. That meant it still needed to deal with the $1.2 billion in long-term debt and total liabilities of $3.5 billion it was carrying at the time of its IPO filing a little over a year ago.
The mattress retailer has been tossing and turning for years now, as DTC companies have chased its market share with generous return policies and other enticements. The company in 2016 had been acquired for $3.8 billion by private equity firm Steinhoff International Holdings, then spent some time in bankruptcy in 2018, when it forged plans to close some 700 stores.
For Tempur Sealy, which makes and sells mattresses under private labels as well as its Tempur-Pedic, Sealy and Stearns & Foster lines, Mattress Firm’s many stores will allow it to get closer to its customers, according to Tempur Sealy Chairman and CEO Scott Thompson.
“This combination will accelerate our growth trajectory and enhance operating cash flow,” Thompson said. “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's more than 2,300 brick-and-mortar retail stores, e-commerce operations, and sleep education and sleep tracking platforms complement Tempur Sealy's DTC operations, “enabling a seamless omni-channel ecosystem that meets the needs of more consumers nationwide,” the companies said.
Tempur Sealy expects to begin realizing various marketing and other synergies by the end of year two and to realize at least $100 million in annual run-rate synergies by the end of year four, per the companies’ release. Tempur Sealy on Tuesday also reported its Q1 results, including a 2.5% decline in total net sales to $1.2 billion and a 34.7% decline in net income to $85.3 million.
Clarification: This story has been updated to clarify in which year Tempur Sealy expects to begin realizing $100 million in annual run-rate synergies.