FTC Moves to Block Tempur Sealy’s $4 Billion Acquisition of Mattress Firm

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The U.S. Federal Trade Commission (FTC) is poised to challenge the $4 billion merger between mattress manufacturer Tempur Sealy International Inc and retailer Mattress Firm, citing concerns over its potential impact on manufacturing jobs, according to a source familiar with the matter.

Tempur Sealy announced the cash-and-stock deal in May 2023, aiming to integrate Mattress Firm’s extensive network of over 2,300 brick-and-mortar stores, which would elevate the combined entity to approximately 3,000 stores globally.

The FTC, under Chair Lina Khan, has expressed apprehension about mergers affecting workers’ bargaining power in specific labor markets. This scrutiny echoes the agency’s stance against other proposed mergers, such as the Kroger-Albertsons deal in the grocery sector.

Tempur Sealy declined to comment on the potential lawsuit, while Mattress Firm did not immediately respond to requests for comment.

Most mattresses sold in the U.S. are domestically manufactured, with $7.8 billion in sales attributed to domestic production last year, compared to $809 million in imports, as per data from the International Sleep Products Association.

In anticipation of regulatory challenges, Tempur Sealy has indicated readiness to divest certain stores and has secured agreements with six other mattress manufacturers to continue supplying Mattress Firm stores with their brands.

Last year, Tempur Sealy CEO Scott Thompson disclosed that the merger agreement included a $50 million break-up fee in case of FTC-related issues, along with a cap on the maximum number of stores to be divested.

Tempur Sealy had initially projected completing the acquisition of Mattress Firm by the second half of 2024, but the FTC’s impending legal action casts uncertainty over the merger’s timeline and prospects.