Tempur Sealy, based in Kentucky, has agreed to buy Mattress Firm, based in Houston for approximately $4 billion. The purchase price consists of $2.7 billion of cash and $1.3 billion in stock.
Mattress Firm was a public company until it was acquired by Steinhoff, a South African company, in September 2016 for $2.4 billion. The following year, Steinhoff was hit with an accounting fraud (not involving Mattress Firm) and, in October 2018, Mattress Firm filed for Chapter 11 bankruptcy. It exited 48 days later, having shed 640 uneconomic leases.
Ironically, one of the contributing factors in the bankruptcy was that Mattress Firm and Tempur Sealy had a spectacular falling out in February 2017, that caused revenues to fall significantly. A new supply agreement with Tempur Sealy was signed in 2019, allowing Tempur and Sealy beds to be sold in Mattress Firm’s stores again.
Post-bankruptcy, Steinhoff owns 50.1% of the common stock whilst creditors that provided the exit financing owned the rest (prior to dilution due to management equity).
Revenue grew from $3.3 billion for the year ended September 2020 to $4.4 billion in each of the following two years. For the 12 months ending March 2023, revenues fell 9% over the comparable period to $4.2 billion as consumer spending shifted towards services. It currently has 2,329 stores ($1.8 million revenue per store).
The transaction values Mattress Firm at 9.3 times adjusted EBITDA. In addition, Tempur Sealy expects to generate $100 million in annual savings by year 4.
Mattress Firm filed to go public in January 2022 but withdrew its filing a year later, having incurred $10.5 million in costs.
The deal is expected to close in the second half of 2024.