The Federal Trade Commission (FTC) has unanimously decided to block Tempur Sealy's planned $4 billion acquisition of Mattress Firm. The regulatory body expressed concerns about competition and pricing, thereby putting a long-planned bedding deal into question.
On Tuesday, the FTC announced that it had filed an administrative complaint and authorized a lawsuit in federal court to block the deal. Additionally, it allowed staff to seek a temporary restraining order and a preliminary injunction. This decision comes at a time when the agency is adopting a more aggressive stance on antitrust enforcement.
The FTC argues that the acquisition of Mattress Firm would give the world's largest mattress supplier and manufacturer the ability and incentive to suppress competition and raise prices for millions of consumers.
The proposed vertical merger would combine Tempur Sealy’s manufacturing and supply operations with Mattress Firm’s extensive retail network, giving the combined company tremendous power over several parts of the mattress supply chain," according to the FTC.
Tempur Sealy Responded to FTC Challenge, Stating That Mattress Firm Represents Only a Small Portion of U.S. Retail Outlets for Bedding Products. The Company Also Emphasized That Brick-and-Mortar Retailers and Direct-to-Consumer Brands Sell Millions of Bedding Items Online Annually and That Employee Unions Did Not Object to the Acquisition.
Tempur Sealy was confident that a successful lawsuit would allow the deal to be concluded by the end of 2024 or the beginning of 2025.
The FTC explained in several documents that Tempur Sealy plans to restrict competitors' access to stores operated by Mattress Firm. This could impair rivals' ability to compete in the market and potentially lead to competing suppliers reducing production, closing factories, and laying off employees.
Through emails, presentations, and other deal documents, Tempur Sealy made it clear that the acquisition of Mattress Firm is intended to hinder competitors and dominate the market," said Henry Liu, Director of the FTC's Bureau of Competition.
The lawsuit and the motion for a preliminary injunction are being filed in the U.S. District Court for the Southern District of Texas to stop the deal.
When the acquisition was announced last year, the companies stated that the transaction would boost Tempur Sealy's revenues as increased costs for materials, logistics, and labor weigh on the industry. Tempur Sealy and Mattress Firm had been negotiating for two years before reaching an agreement.
Tempur Sealy CEO Scott Thompson had stated in an investor conference that the company would likely consider share buybacks if the deal does not go through.
