Tempur-Pedic buying Sealy for $228.6 million
NEW YORK — Mattress rivals Tempur-Pedic and Sealy are becoming bedfellows.
Tempur-Pedic, the 20-year-old leader in foam mattresses, is buying more-than-a century-old rival Sealy for about $228.6 million in cash.
The acquisition comes as competition has increased in the mattress industry, with makers stepping up their marketing and promotions to help lure cost-conscious consumers into making big purchases.
Tempur-Pedic International Inc. said Thursday that it will pay $2.20 per Sealy share, which is a 3 percent premium to the company’s Wednesday closing price of $2.14.
Sealy, of Trinity, N.C., currently has about 103.9 million outstanding shares, according to FactSet.
The companies put the total value of the deal at $1.3 billion, including debt. They say that the transaction will create a $2.7 billion global bedding company.
“Tempur-Pedic and Sealy together will have products for almost every consumer preference and price point, distribution through all key channels, in-house expertise on most key bedding technologies, and a world-class research and development team,” Tempur-Pedic CEO Mark Sarvary said in a statement.
Tempur-Pedic and Sealy will run independently of each other, with Sealy’s CEO Larry Rogers remaining in that position. Rogers will report to Sarvary.
Tempur-Pedic, founded in 1992, makes and distributes mattresses and pillows in more than 80 countries under its Tempur and Tempur-Pedic brands.
The company borrowed the memory foam technology developed by NASA. Memory foam mattresses conform to users’ shape and position by reacting to their body temperature and weight.
Sealy, which was founded in 1881, makes a broad array of spring coil beds under brands including Stearns & Foster, Sealy and Sealy Posturepedic.
While Tempur-Pedic has a particularly strong presence in North America, Europe and Asia, Sealy has a strong presence in North America, Asia and Argentina. Sealy also has strong brand recognition through its international licensees and joint ventures.
“In one action, Tempur-Pedic gains access to new slots at major retailers and independents with a complementary product suite,” wrote Brian Sozzi, chief equities analyst at NBG Productions in a note to clients. “Essentially, the company has fought to build a wall around itself from competitors that have demonstrated innovation.” Sozzi estimated that annual revenue combined for the two companies is around $2.8 billion to $3.1 billion for 2012, making the combination the world’s largest bedding company.