FTC unanimously moves to block $4 billion merger of mattress giants

New York (CNN) — The Federal Trade Commission unanimously voted to block mattress maker Tempur Sealy’s purchase of Mattress Firm on Tuesday.

In May 2023, Tempur Sealy – the world’s largest mattress supplier and manufacturer – agreed to buy the United States’ largest bedding retailer in a roughly $4 billion deal.

The FTC authorized a lawsuit in federal court to block the acquisition.

The Commission said that the proposed deal would suppress competition and raise prices for mattress buyers, and give the companies “enormous power” in the mattress supply chain. The FTC also said that documents showed that competing mattress suppliers would lose access to its most important retail channel. These suppliers employ thousands of American workers, it said.

“Through emails, presentations, and other deal documents, Tempur Sealy has made it abundantly clear that its acquisition of Mattress Firm is intended to kneecap competitors and dominate the market,” said Henry Liu, Director of the FTC’s Bureau of Competition in a press release. “This deal isn’t about creating efficiencies; it’s about crippling the competition, which would raise prices on an essential good and could lead to layoffs for good paying American manufacturing jobs in nearly a dozen states.”

The deal would have given the combined company 3,000 stores and 71 manufacturing facilities and was expected to close in the second half of 2024. Tempur Sealy’s portfolio includes Tempur-Pedic, Sealy and Stearns and Foster.

The deal was seen as beneficial for both parties by analysts, because mattress and furniture sales have slowed following a pandemic-induced high, when consumers splurged heavily on home furnishings. Mattress Firm was already dealing with its own financial issues, including a 2018 bankruptcy. The retailer struggled with over-expansion and online competitors, including Casper and Amazon.

The FTC alleges that the reduced competition in the premium mattress space would harm the substantial portion of those mattress buyers – “working class, older adults” who often rely on financing.

The purchase could drive rivals, which include Serta Simmons Bedding and Purple Innovation, Inc., out of business, the FTC warned.

“For example, the combined firm could limit present and future rivals’ access to Mattress Firm’s floor space, award sales associates higher commissions on Tempur Sealy products sold, or otherwise take steps designed to steer customers away from competitors’ products and toward Tempur Sealy’s mattresses,” the FTC said.

In a statement, Tempur Sealy said the bedding industry is “highly competitive” and only a small fraction of brick-and-mortar storefronts are Mattress Firms. It also said it believes a litigation process will be complete in the next few months, and it still expects to close the transaction in late 2024 or early 2025.

“Tempur Sealy has been working constructively with the FTC to secure regulatory approval for this transaction and is disappointed that the FTC has initiated litigation. We appreciate their efforts to understand the industry and the proposed transaction, but ultimately believe the FTC’s perspective does not reflect all the relevant facts and law,” the statement said.

Mattress Firm similarly said it was disappointed in a statement, and said it “continues to believe that the transaction with Tempur Sealy will be beneficial to consumers and employees as well as the overall bedding and furniture industry.”

This story has been updated with additional context.

CNN’s Jordan Valinsky contributed to this report.

Correction: A previous story misstated the Tempur Sealy portfolio. It includes Tempur-Pedic, Sealy and Stearns and Foster.

The-CNN-Wire
™ & © 2024 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.