Tempur Sealy International Inc. agreed to buy Mattress Firm from Steinhoff International Holdings NV in a cash-and-stock deal valued at about $4 billion.

The transaction will combine two well-known brands at a time when consumers are pulling back from pandemic-era splurges on home furnishings. The companies said in a May 9 statement that they will fund the purchase with about $2.7 billion of cash and $1.3 billion in stock.

Mattress Firm — the largest U.S. specialty mattress retailer, with more than 2,300 stores across 49 states — is expected to operate as a separate business unit within Tempur Sealy. The combined company will have about 3,000 retail locations globally, 71 manufacturing facilities and more than 21,000 employees.

Keith Hughes, an analyst at Truist Securities, called it a “landmark deal for the mattress industry” but noted that U.S. regulators may have antitrust concerns.

“The deal had been speculated upon for some time, and we believe the question now shifts to government approval,” Hughes said in a research note. “The deal will bring the potential of significant revenue and cost synergies, but also dis-synergies around the loss of other retail at TPX and suppliers at Mattress Firm.”

The companies expect the combination to streamline retail operations, customer service and supply-chain management for Tempur Sealy. The company expects the deal to add to adjusted earnings in the first year and sees annual cost savings of at least $100 million within four years.

Tempur Sealy is No. 164 in the Top 1000. The database is Digital Commerce 360’s ranking of the largest North American online retailers by web sales. Mattress Firm is No. 281.

Pandemic boost

The home-furnishings industry was bolstered during the pandemic as Americans spent more time indoors and used government stimulus checks and inflated savings to buy more items for the house. Spending on such things has fallen as the pandemic has eased and inflation has put pressure on shoppers’ budgets.

Stellenbosch, South Africa-based Steinhoff bought Mattress Firm for $3.8 billion in 2016 at the height of an acquisition spree. The company has sold shares in many of its units to pay down debt. It’s still trying to rebuild after an accounting scandal in late 2017. This is the first sale since it started a court process to avoid bankruptcy.

The company announced in January that Mattress Firm was withdrawing its initial public offering registration to explore all options.

The companies expect to close the agreement in the second half of 2024 subject to regulatory approvals. More than 80% of Mattress Firm shareholders have approved it, and doesn’t require approval from Tempur Sealy holders.

J.P. Morgan Securities is serving as financial adviser to Tempur Sealy. Goldman Sachs, Barclays and Jefferies are financial advisers for Mattress Firm.

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