The Federal Trade Commission has been investigating potential antitrust concerns over Tempur Sealy International Inc.’s proposed deal with Mattress Firm Inc. since last year, according to two people familiar with the agency’s probe.
The $4 billion deal, announced Tuesday, would marry the world’s largest mattress manufacturer with the largest US specialty mattress retailer. Mattress Firm, owned by South African retailer Steinhoff International Holdings NV, operates more than 2,300 stores across 49 states, while Tempur Sealy manufactures several of the top mattress brands include Tempur-Pedic, Sealy Posturepedic and Stearns & Foster.
The FTC has been probing the deal since at least December, according to the people who asked for anonymity to discuss the confidential investigation. While most merger reviews occur after a deal is publicly announced, the parties can inform the agency ahead of time to get a start on the investigation.
In its deal announcement Tuesday, Tempur Sealy said the agency has already opened an in-depth investigation and it “expects to work cooperatively with the FTC to complete the acquisition.”
An FTC spokesperson declined to comment.
Mattress Firm initially planned to go public this year, but paused the IPO process in January. Steinhoff has been struggling since a 2017 accounting scandal that has seen the resignation of the company’s CEO and investigations in Europe and South Africa. The company has been forced to sell off a range of global retail assets to raise funds and published a restructuring plan on April 26 in a bid to avoid bankruptcy.
The US retail mattress industry was about $18 billion in 2020, with Mattress Firm accounting for roughly 20% of that, according to securities filings.
The FTC has taken a close look and sought to block a number of recent so-called vertical transactions where a distributor seeks to buy a key manufacturer, such as Xbox maker Microsoft Corp.’s $69 billion deal to buy video game studio Activision Blizzard Inc. In its review, the FTC has focused on how Tempur Sealy might use Mattress Firm to foreclose rival mattress brands, said one of the people.
The FTC has also sought information on in-person versus online sales, the person said. A January 2022 survey by the Better Sleep Council found 54% of buyers bought their mattress online, surpassing for the first time the number who purchased in a retail store.