Tempur-Pedic, Sealy deal creates $2.7 billion bedding powerhouse
David Perry -- Furniture Today, March 18, 2013
ARCHDALE, N.C. — Tempur-Pedic's acquisition of Sealy, which creates a $2.7 billion global bedding powerhouse and combines the No. 4 and No. 2 U.S. bedding producers, has been completed.
Top executives of the two companies - Tempur-Pedic CEO Mark Sarvary and Sealy CEO Larry Rogers - told Furniture/Today that their brands will both benefit from the acquisition through increased investment in research and development and more robust marketing programs.
Tempur-Pedic paid $228.6 million for Sealy's stock, and the deal was valued at $1.3 billion including the assumption of Sealy debt.
In an exclusive interview with F/T, the two sketched a broad outline of how the deal will affect their companies. They said they plan to change Tempur-Pedic's name to Tempur Sealy International, a move that is subject to stockholder approval later this year.
That new name gives both brands prominent billing and recognizes the "transformational" nature of the new company, officials said. The Sealy and Tempur-Pedic brands will continue to go to market as independent entities, they added.
"We have two powerful brands," said Sarvary. "Given the power of the Sealy brand, it is important to retain its name in the title." He said the new company will be "a truly global bedding company, operating in 80 countries."
In combining Sealy and Tempur, the second and fourth largest U.S. bedding producers, respectively, the new company will be the largest bedding provider in the world, Sarvary said.
Rogers, who will continue to head Sealy's operations and will be based at Sealy's campus in Archdale, said the new company will be a formidable competitor.
"We are excited about bringing together two leaders of the industry to create something much better for our consumers and retailers," he said. "Together we will develop new products which will give consumers the best night's sleep possible. We will create a more robust marketing effort to educate and motivate consumers to buy."
Sarvary said the corporate name change won't affect any of the brands in the company's portfolio.
"While our new corporate name will be Tempur Sealy International, Inc., all consumer/customer-facing brand names will not be impacted and will go to market just as they always have - including Tempur, Tempur-Pedic, Sealy, Sealy Posturepedic, Optimum and Stearns & Foster," Sarvary said. "Tempur Sealy now represents a $2.7 billion global company offering an unmatched portfolio of iconic bedding brands."
The new company will operate "the strongest brand portfolio in the industry," Sarvary said. He said the "complementary product and market fit" of the two companies "delivers a unique opportunity to create the first full spectrum, global bedding company that addresses all market segments and consumer preferences."
Rogers said Sealy's "strength and expertise in innerspring and hybrid innerspring mattress technologies fits seamlessly with Tempur-Pedic's position in visco-elastic (memory foam) mattress, adjustable base and pillow technologies."
The "highly complementary global footprint" of the combined companies offers the ability to create significant shareholder value, with annual cost synergies in excess of $40 million expected by the third year, officials said. Those savings will be realized through increased efficiencies in the purchasing and supply chain areas, among others, they said.
The new company will be based in Lexington, Ky., where Tempur-Pedic is headquartered. But some functions will continue to be based at Sealy's Archdale campus, Sarvary and Rogers said. They said Sealy will keep a "significant" presence in the High Point area.
The new company could bring Tempur-Pedic mattresses back to the High Point Market, one that Tempur-Pedic left years ago. While it's not likely that Tempur-Pedic products will be in Sealy's Archdale showroom as soon as this April, it is possible that Tempur-Pedic could have a presence in High Point at some point, the officials said.
Sarvary said the new company will be a member of the International Sleep Products Assn. Tempur-Pedic is a current ISPA member, while Sealy left ISPA several years ago and has not rejoined.