Skip to main content

The Globe and Mail

Tempur-Pedic to buy rival mattress maker Sealy

File photo of a bed.

Christine Glade/iStockphoto

Tempur-Pedic International Inc will acquire rival Sealy Corp for about $242 -million (U.S.) and assume about $750-million in debt, as the once-dominant specialty mattress maker seeks to fend off rivals by broadening its product range.

Tempur Pedic, which pioneered the specialty beds market with foam-based technology developed by NASA, is attempting to regain market share from fast-moving rivals in the burgeoning market for foam mattresses, popular with aging baby boomers.

The company's market value halved to about $1.5-billion after it slashed full-year forecasts in June, blaming rising competition from privately owned manufacturers such as Simmons Bedding Co and Serta Inc.

Story continues below advertisement

Sealy, the long-time industry leader, will give Tempur-Pedic expertise in traditional inner-spring coil beds and brands including Sealy Posturepedic and Stearns & Foster.

The combined company will have a presence in more than 80 countries in every product category, Tempur-Pedic said.

The offer price of $2.20 per share represents a 3 per cent premium to Sealy's Wednesday close of $2.14. Sealy shares were trading above the offer price at $2.26 on Thursday, indicating that some investors expect a higher offer.

Tempur-Pedic shares were up 22 per cent at $32.73.

Tempur-Pedic said it had received consent from shareholders holding about 51 per cent of Sealy, which was founded in 1881 in the Texas town of the same name. It said no other shareholder approvals are needed to complete the deal.

Private equity firm Kohlberg Kravis Roberts & Co owns about 44 per cent of Sealy, a remnant of its $1.5-billion deal in 2004 to take the company private.

Earlier this year, Sealy's second-largest shareholder, H Partners, launched an attack on KKR accusing it of wiping out 90 per cent of the mattress maker's value since it went public in 2006, saddling it with debt and milking it for fees.

Story continues below advertisement

Tempur-Pedic said it had secured $1.77-billion in financing from Bank of America for the deal and to pay down existing Sealy and Tempur-Pedic debt. Tempur-Pedic had long-term debt of $680 million as of June 30.

Merrill Lynch will act as lead arranger and bookrunning manager for the debt.

After the deal, Tempur-Pedic and Sealy will continue to operate independently and Sealy Chief Executive Larry Rogers will remain CEO of Sealy and report to Mark Sarvary, Tempur-Pedic's CEO.

Report an error

The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨