BREAKING NEWS: Tempur-Pedic to Buy Sealy in $1.3 Billion Deal

September 26, 2012  by in UnCategorized   

By Home Furnishings Business in Acquisition on September 27, 2012

Two of the leading bedding suppliers are getting into bed with one another-Tempur-Pedic (NYSE: TPX) and Sealy (NYSE: ZZ) are merging.

The companies say the acquisition of Sealy by Tempur-Pedic will create a $2.7 billion bedding company.

The transaction has been approved by the companies' boards of directors. Stockholders with about 51 percent of Sealy's outstanding common stock have consented to the deal.

During a conference call to discuss the deal this morning, Sarvary emphasized the current business plan for the deal, which should close by early next year, calls for two companies maintaining separate consumer-facing presences.

"The companies have different ways of going to market," he said. "It's the back end where we'll do the sharing. ... Leveraging each other's product development."

Tempur-Pedic remains committed to growing its specialty sleep products, while Sealy will look to keep building its more traditional mattress portfolio.

Rogers noted the transaction will benefit both brands' global business plans--the two have a presence in more than 80 countries.

"The global footprint we both share ... is one of our focuses going forward," he said. "We think it gives both companies access to more international (business)."

Sarvary pointed out the brands' respective global presence will help the other fill gaps.

"By continent, we overlap, but country by country, there are places we can help each other," he said.

There are no current plans to offer increased equity to help finance the transaction, as management is confident Tempur-Pedic's and Sealy's cash flows are strong enough to reduce debt to equity from four times to one-and-a-half to two times within four to five years.

Under the deal, Tempur-Pedic will acquire all of the outstanding common stock of Sealy for $2.20 per share, representing a premium of approximately 23 percent to Sealy's 30-day average closing price Wednesday. In addition, Tempur-Pedic will assume or repay all of Sealy's outstanding convertible and non-convertible debt, for a total transaction value of approximately $1.3 billion. The transaction, which is subject to customary closing conditions, including regulatory approvals, is expected to close during the first half of 2013.

"This is a transformational deal that brings together two great companies, each with globally recognized brands," said Mark Sarvary, Tempur-Pedic CEO. "Tempur-Pedic and Sealy together will have products for almost every consumer preference and price point, distribution through all key channels, in-house expertise on most key bedding technologies, and a world-class research and development team. In addition, our global footprint will span over 80 countries. The shared know-how and improved efficiencies of the combined company will result in tremendous value for our consumers, retailers and shareholders."

Tempur-Pedic and Sealy will operate independently. Larry Rogers, Sealy CEO, who has been with the company for 33 years, will remain CEO of Sealy and will report to Sarvary.

"The complementary product and market fit of these two companies deliver a unique opportunity to create the first full spectrum, global bedding company that addresses all market segments and consumer preferences," Rogers said. "Together, we believe that we can deliver more value than either business could on its own by leveraging our strong combined assets."