The U.S. Federal Trade Commission (FTC) is set to file a lawsuit to block the $4 billion acquisition of Mattress Firm by Tempur Sealy International Inc. (NYSE: TPX), according to a source familiar with the matter.
Tempur Sealy announced the cash-and-stock deal in May 2023, aiming to integrate Mattress Firm’s extensive network of over 2,300 retail locations. If completed, the merger would result in a global company with approximately 3,000 stores.
A key concern for the FTC is the potential impact of the merger on manufacturing jobs within the United States, the source noted.
Tempur Sealy has declined to comment, and representatives from Mattress Firm were not immediately available for a response.
In the U.S., the vast majority of mattresses are manufactured domestically, with $7.8 billion in sales last year, compared to $809 million in imports, based on data from the International Sleep Products Association.
Under FTC Chair Lina Khan, there has been increased scrutiny on how mergers could potentially reduce workers’ bargaining power in specific labor markets. This focus is also evident in the FTC’s efforts to block the merger between grocery giants Kroger (NYSE: KR) and Albertsons (NYSE: ACI).
Tempur Sealy had anticipated completing the acquisition of Mattress Firm in the latter half of 2024. To address regulatory concerns, the company indicated it could divest some stores. Additionally, in May, it signed agreements with six other mattress manufacturers to ensure Mattress Firm stores continue to carry their brands.
The merger agreement stipulates a $50 million break-up fee should FTC issues arise, along with a maximum store divestiture limit, according to Tempur Sealy CEO Scott Thompson.
Investment Analysis:
This merger block presents a critical moment for investors. The potential for divestitures and the existing agreements with other mattress manufacturers may mitigate some concerns, but the regulatory environment under Chair Lina Khan poses significant hurdles. Investors should closely monitor FTC developments, as they may influence market confidence and Tempur Sealy’s strategic direction.
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