MJP –
An unexpected furniture store is now closing 175 locations as it begins a new merger and divests several of its operations.
Tempur Sealy is making strides towards its proposed $4 billion merger with Mattress Firm despite facing challenges from the Federal Trade Commission (FTC).
To facilitate the deal, the company has agreed to sell its Sleep Outfitters subsidiary along with a portion of Mattress Firm’s locations, as detailed in financial filings released Monday.
Pending approval of the merger, MW SO Holdings Company, also known as Mattress Warehouse, will acquire 73 Mattress Firm stores and 103 Sleep Outfitters specialty mattress retail locations, along with seven distribution centers.
The FTC’s hearings regarding the merger are set to commence on November 12 and are expected to last two weeks.
Tempur Sealy anticipates that the hearings will conclude within the next few months, allowing the merger to potentially close by late 2024 or early 2025.
Scott Thompson, CEO of Tempur Sealy, indicated that these divestitures were made in response to discussions with regulators, aiming to advance the acquisition of Mattress Firm.
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However, it remains uncertain whether these changes will sufficiently address regulators’ concerns that the merger could grant the combined entity excessive control over the mattress supply chain, potentially leading to reduced competition and higher consumer prices.
As of July, Mattress Firm operated approximately 2,300 physical stores, while Tempur Sealy owned about 99 Tempur-Pedic and 109 Sleep Outfitters locations.
If the merger and related transactions go through, Tempur Sealy expects to operate over 2,800 stores globally, with half of its North American sales coming from Mattress Firm.
Despite its significant presence as the largest mattress specialty retailer in the U.S., Mattress Firm has closed around 700 locations since emerging from bankruptcy in 2018, with further reductions since then.
In its July legal filings, Mattress Firm contested claims that its retail footprint overshadows those of other mattress and furniture retailers.
Mattress Warehouse, which currently operates over 320 stores, positions itself as the second-largest player in the mattress retail sector.
In conjunction with the divestiture plan, Tempur Sealy announced a proposed senior secured term loan of up to $1.6 billion, maturing in seven years, to fund the Mattress Firm acquisition.
S&P Ratings analysts have assigned a preliminary BBB- rating to this proposed debt, although they caution that the merger may not be finalized.
They have also placed Tempur Sealy’s unsecured notes on CreditWatch with negative implications, signaling a potential downgrade due to the anticipated increase in senior secured debt associated with the transaction.
