Published on January 16th, 2013 | by Mattress Journal0
Tempurpedic to Buy Sealy in Billion Dollar Deal
Tempurpedic and Sealy, two powerhouse manufacturers, plan to merge during the first half of 2013, pending final FTC approval. The deal is broken down into Tempurpedic purchasing Sealy for $228.6 million, but with the assumption of debt the total deal is expected to hold a value of $1.3 billion. These two mattress makers have created a solid reputation in the industry; Tempurpedic being a leader in memory foam and the other producing top of the line innerspring beds. Because these two mattress lines are different in product and branding, it is an interesting combination, turning the heads of the entire industry as people question what will come of this enterprise. With two very different types of mattresses joining forces, what does this combination mean for future beds, the industry and consumers?
Impacts on Tempurpedic and Sealy Consumers
While the details of the collaboration are pending, any time two leading brands join together there will be an impact on the industry and likewise the consumer. As of now, Tempurpedic’s bread and butter is the high-end, luxury memory foam market, while Sealy focuses on low-to-mid-range innerspring beds. The decision to purchase Sealy may be a direct effect of Tempur’s slipping sales in the past year, as they loose ground to more affordable competitors. Sealy recently forayed into specialty mattresses as well though, with the Optimum memory foam line and Stearns and Foster latex lines. Initial announcements indicate the brands intend to function independently, but it will be interesting to see if he parent company cuts Sealy’s competing memory foam ventures, or even incorporates Tempur materials in Sealy mattresses, which may influence the consumer’s power to choose between the two types of mattresses. Some researchers indicate that Tempurpedic will probably take a few years to incorporate any big changes into the makeup the mattress. For now, consumers have little power in the decision-making process that will inevitably influence the entire mattress marketplace.
The other primary change for consumers and retailers alike is less buying power and influence as the market consolidates. These two companies are both top-5 mattress manufacturers, and their unification into the largest mattress brand means they will hold great power over resellers and consumer choice. This and other financial reasons is why the FTC is still investigating the buy-out.
Reactions from the Industry
The buyout certainly has the industry buzzing with the motives and intentions of Tempurpedic. Reports suggest that Tempurpedic is interested in Sealy for the purpose of expanding their product line and including different types of mattresses to their list of bedding. It is suggested that Tempurpedic may include Tempur materials with Sealy mattresses in one of the luxury brands that are offered such as Stearns & Foster. The reason for this is that it would be the most economical way to extend the Tempur line and drive new revenues for the Sealy lines. Still, the question remains whether or not the two types of beds will work together or if the two types will truly remain separate – and what effects either direction will have for bottomlines. For the time being, nobody is sure on the specifics as far as what this partnership means for the creation of new mattresses, though other industry players are keeping a careful eye on developments.
The Tempurpedic Brand Going Forward
This deal has certainly created a tidal wave in the mattress industry because so much is still unknown about how the two mattress makers will join together. For now, the industry and consumers alike speculate about what this means for future mattresses and what impacts this collaboration will have on prices, retailers, and the reputation of Tempurpedic. As mentioned, the finalization of the deal will commence only after FTC approval. In the mean-time, all eyes are on Tempurpedic to see how this alliance will influence the industry as a whole.