US to block Tempur Sealy's $4 billion buy of retailer Mattress Firm

FILE PHOTO: A Mattress Firm store, a brand owned by Steinhoff, is shown in Encinitas, California, U.S., January 25, 2018. REUTERS/Mike Blake/File Photo

By Jody Godoy

(Reuters) -The U.S. Federal Trade Commission is preparing to sue to block the $4 billion merger between mattress manufacturer Tempur Sealy International Inc and retailer Mattress Firm, a source familiar with the matter said on Tuesday.

Tempur Sealy had announced the cash-and-stock deal in May 2023, seeking to add Mattress Firm's more than 2,300 brick-and-mortar store locations. The combined company would have about 3,000 stores globally.

One of the FTC's concerns about the deal is its impact on manufacturing jobs, the source said.

A spokesperson for Tempur Sealy declined to comment. A spokesperson for Mattress Firm did not immediately respond to a request for comment.

The vast majority of mattresses purchased in the U.S. are made domestically, with around $7.8 billion in sales last year, compared with around $809 million in imports, according to statistics compiled by the International Sleep Products Association.

The FTC under Chair Lina Khan has scrutinized how mergers potentially diminish workers' bargaining power in specific labor markets.

That concern is among those animating the agency's efforts to block a merger between grocery chains Kroger and Albertsons.

Tempur Sealy has said it expected to complete the purchase of Mattress Firm in the second half of 2024.

To address potential regulatory concerns, Tempur Sealy has said it could divest some stores, and in May said it signed agreements with six other mattress makers for Mattress Firm stores to continue carrying their brands.

The merger agreement includes a $50 million break-up fee for FTC issues and a maximum store divestiture limit, Tempur Sealy CEO Scott Thompson said last year.

(Reporting by Jody Godoy in New York, Editing by Louise Heavens)