Tempur Sealy buys Mattress no M&A do I’m perfect

2023-05-10 16:06:17

Tempur Sealy is buying Mattress Firm in a transaction that brings together one of the world’s largest mattress manufacturers with the industry’s leading US retailer.

The transaction will create a giant in the sleep market with revenues of more than US$9 billion, 3,000 physical stores, 71 factories, four R&D centers and more than 21,000 employees.

Tempur Sealy is paying $4 billion for Mattress, regarding a year’s worth of company revenue. Of the total, US$ 2.7 billion will be paid in cash and the remainder in Tempur Sealy shares, valued at US$ 37.32 each.

The mattress giant is worth $6.5 billion on the New York Stock Exchange.

The transaction had already been negotiated between the two companies since 2021.

According to Tempur Sealy CEO Scott Thompson, the transaction supports all four of the company’s long-term initiatives: developing the highest quality bedding products, promoting brands with compelling marketing, optimizing the omnichannel distribution platform, and grow earnings per share.

“This acquisition will make Tempur Sealy more competitive, bringing us closer to consumers and facilitating continuous innovation,” the CEO said in a note.

Last year, Mattress Firm — which is owned by private equity firm Steinhoff International — had filed for an IPO but withdrew following the market closed.

The expectation of the two companies is that the transaction will only be completed in the second half of next year, given the regulatory scrutiny it must face. After closing, the two companies are expected to continue operating as independent business units.

Tempur Sealy’s board will now have two new seats to accommodate Mattres representatives.

The transaction comes at a time when Tempur Sealy sales have cooled following the boom of the pandemic, when consumers started to value domestic life more and invest in comfort.

In the first quarter of this year, the company’s sales fell 2.5% to $1.21 billion, slightly below consensus. But profit suffered the most, falling 35% to $85.3 million. The consensus was $91m.

Founded in 1992, Tempur Sealy pioneered the manufacture of ‘memory foam’ mattresses, a technology developed by NASA in the 1960s that causes the mattress to quickly return to its original shape following the user gets out of bed.

But the company as it is today was born out of a merger of rivals.

Until 2012, Tempur-Pedic had good margins with the sale of ‘memory foam’, until a competitor, Sealy, began offering a similar and cheaper mattress. In 2013, the two companies went to sleep in the same bed.

Peter Arbex

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