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The Federal Trade Commission (FTC) has taken legal action to block the planned $4 billion purchase of Mattress Firm by Tempur Sealy. 

Tempur Sealy (TPX), which includes well-known brands like Tempur-Pedic®, Sealy®, and Stearns & Foster®, announced the planned acquisition in May 2023. Following the announcement, Tempur Sealy shares rose by 2.4%.

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FTC Blocks Deal

The FTC has issued an administrative complaint and authorized a federal lawsuit to prevent the deal.

 The regulator argues that the acquisition would allow Tempur Sealy, the world’s largest mattress supplier and manufacturer, to "suppress competition" and increase mattress prices for millions of consumers. 

The FTC's statement highlighted concerns about potential market domination and anti-competitive practices.

Henry Liu, Director of the FTC’s Bureau of Competition, stated, "Through emails, presentations, and other deal documents, Tempur Sealy has made it abundantly clear that its acquisition of Mattress Firm is intended to kneecap competitors and dominate the market. This deal isn’t about creating efficiencies; it’s about crippling the competition, which would raise prices on an essential good and could lead to layoffs for good paying American manufacturing jobs in nearly a dozen states.”

The FTC Commission voted unanimously (5-0) to challenge the transaction. Reports surfaced on Monday that the FTC was preparing a lawsuit, following a meeting last week between the companies and the regulator in a last-ditch effort to save the merger.

Tempur Sealy Responds

Tempur Sealy responded to the FTC’s suit, expressing disagreement with the FTC's stance.

 The company claimed that "We are and have been open to appropriate commitments to address FTC concerns. Consistent with our operation of the multiple bedding retailers we have acquired in Europe, Mattress Firm will remain a multi-branded retailer, and we have already engaged with numerous Mattress Firm suppliers on post-merger supply agreements and have executed several agreements. In keeping with our multi-brand strategy, we have also offered a guaranteed slot commitment for third-party manufacturers at Mattress Firm stores. Lastly, we have been open to a divestiture of stores and supporting infrastructure.”

Tempur Sealy emphasized its belief in the "procompetitive rationale" for the transaction and expressed confidence in a successful litigation process. The company anticipates that litigation could be completed by late 2024 or early 2025, allowing the transaction to proceed.

The FTC’s legal action against Tempur Sealy’s acquisition of Mattress Firm underscores the regulatory increased scrutiny facing large mergers. The outcome of this lawsuit will significantly impact the mattress industry and set a precedent for future mergers and acquisitions.