Global mattress manufacturer Tempur Sealy International, Inc. has announced the acquisition of US retailer Mattress Firm in a cash and stock transaction valued at approximately $4bn.
The transaction is expected to be funded by approximately $2.7bn of cash consideration and $1.3bn in stock consideration issued to Mattress Firm shareholders, reflecting the issuance of 34.2 million shares of common stock based on the closing share price of $37.62 as of May 8, 2023.
The transaction is currently anticipated to close in the second half of 2024, subject to the satisfaction of customary closing conditions, including applicable regulatory approvals. Following the close of the transaction, Mattress Firm is expected to operate as a separate business unit within the Company.
Founded in 1986, Mattress Firm is the largest mattress specialty retailer in the U.S., operating over 2,300 brick-and-mortar retail locations and a growing e-commerce platform. Mattress Firm’s more than 6,200 highly trained retail sales associates provide personalized service to help consumers choose the ideal bedding products across their robust assortment of market-leading brands.
This combination will complement Tempur Sealy’s extensive product development and manufacturing capabilities with vertically integrated retail. Together, Tempur Sealy and Mattress Firm’s combined global footprint will include approximately 3,000 retail stores, 30 e-commerce platforms, 71 manufacturing facilities, and four state-of-the-art R&D facilities worldwide. These combined operations will be supported by more than 21,000 best-in-class employees with a collective focus on providing breakthrough sleep solutions to consumers in over 100 countries.
Tempur Sealy Chairman and CEO Scott Thompson said: “This transaction advances all four of our key long-term initiatives: to develop the highest quality bedding products, promote brands with compelling marketing, optimize our diverse omnichannel distribution platform, and drive EPS growth. Consistent with our M&A strategy, this acquisition will make Tempur Sealy more competitive by bringing us closer to consumers and facilitating continued innovation.”
“We are excited by the long-term growth prospects for our global vertically integrated Company. This combination will accelerate our growth trajectory and enhance operating cash flow. 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: “We know that every customer has unique needs and wants when it comes to a sleep solution that is perfect for them. As part of Tempur Sealy, our customers will benefit from our combined portfolio of highly recognized brands and products, extensive omni-channel capabilities, industry leading innovation and best-in-class teams. Under Tempur Sealy’s leadership, our combined company will be in a unique position to take advantage of our shared values and complementary capabilities to better address consumers’ needs and drive growth.”
At the same time of the announcement, Tempur Sealy also reported its first quarter trading update ended 31 March 2023, with total net sales down 2.5% to $1,208.1 million as compared to $1,239.5 million in the first quarter of 2022.
North America net sales decreased 1.3% to $919.6 million as compared to $931.4 million in the first quarter of 2022. This decline was primarily driven by continued macroeconomic pressures impacting U.S. consumer behaviour.
International net sales decreased 6.4% to $288.5 million as compared to $308.1 million in the first quarter of 2022. This decline was primarily driven by unfavourable foreign exchange.
Gross margin was 41.4% as compared to 42.2% in the first quarter of 2022. Net income decreased 34.7% to $85.3 million as compared to $130.7 million in the first quarter of 2022.
Scott Thompson added: “Our first quarter performance reflects the strength of our industry-leading business model, as we continued to outperform the broader industry against a challenging operating backdrop. Though the U.S. industry conditions were slightly less favorable than anticipated as a result of heightened macroeconomic pressures, we performed largely in-line with our first quarter expectations. In the second quarter, our expectation is that our consolidated sales will return to growth year over year, supported by the strong reception to our newly launched products, encouraging order trends quarter to date, and fully lapping the challenging prior year comps in the first quarter.”
