The deal combines a struggling, yet massive, mattress manufacturer with an upstart digitally native, vertically integrated brand that grew its e-commerce sales an Internet Retailer-estimated 60% last year.

Serta Simmons Bedding LLC  and Tuft & Needle announced this week that they are merging.

In doing so, they are combining a struggling, yet massive, mattress manufacturer with an upstart digitally native, vertically integrated brand that grew its e-commerce sales an Internet Retailer-estimated 60% last year. Terms of the deal were not disclosed.  The transaction is expected to close in the next 60 days.

While Serta is significantly larger than Tuft & Needle, it has struggled to compete with the growing number of web-based mattress retailers. Its revenue was down 26.5% last year. According to Internet Retailer estimates, e-commerce generated just $36.3 million last year for the retailer, No. 817 in Internet Retailer 2018 Top 1000, which was about 10% of its total revenue That stands in stark contrast to Tuft & Needle, No. 160, which generated an Internet Retailer-estimated $160 million last year online.

By combining forces, the companies aim to use their vast scale to take on the vast number of other competitors, such as Casper, No. 132. “There’s clearly been disruption in the mattress industry,” write Tuft & Needle co-founders JT Marino and Daehee Park in a statement on the retailer’s website. “We’ve architected and catalyzed this change in the market together—with our team and with our customers. As of today, through our merger with the largest sleep company in the world, we’ve taken the next step in fundamentally changing the industry.”

The merger will take Tuft & Needle to the “next level,” it adds, noting that the move “solidifies Tuft & Needle’s everlasting permanence.”

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By adding scale, the move should also reduce both companies operational costs, says Michael Traub, Serta’s CEO. “Combining [Serta’s] nearly 150-year legacy and leadership in product innovation with Tuft & Needle’s expertise in delivering a best-in-class consumer experience, this merger will greatly accelerate our growth and innovation in the direct-to-consumer segment and significantly enhance our e-commerce capabilities across brands. Together, we have a clear path to transform the consumer experience at scale as well as the future of the industry.”

Tuft & Needle co-founders Marino and Park will report to Traub and join the company’s leadership team. In addition to leading Tuft & Needle, they are tasked with helping drive Serta’s omnichannel and customer-centric initiatives.

The combined company plans to maintain its distinct brands, which include Serta, Beautyrest, Simmons and Tomorrow, which is its direct-to-consumer brand.

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The deal comes about a week after another traditional brand bought a digitally native, vertically integrated brand; Movado Group Inc. last week announced its agreement to buy MVMT Watches Inc., No. 443, for up to $200 million.

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