Mattress maker Tempur-Pedic International Inc. (NYSE: TPX) today announced that it has signed a definitive agreement to acquire competitor Sealy Corp. (NYSE: ZZ) for $2.23 per share. Including assumed debt, the deal is valued at about $1.3 billion.

Tempur-Pedic’s CEO said:

This is a transformational deal that brings together two great companies, each with globally recognized brands. 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.

The boards of both companies have approved the offer and stockholders with about 51% of Sealy stock also have approved the deal. No additional stockholder agreement is required.

Tempur-Pedic said the deal represents a 23% premium to Sealy’s 30-day average closing price as of last night. Sealy’s shares closed at $2.14 yesterday.

Earlier this year the maker of Serta and Simmons mattresses was acquired by leveraged buyout firm Advent International Corp. for about $3 billion. The mattress business is popular with private equity and buyout firms because people are always buying new or replacing an old mattress, which generates a steady cash flow for investors.

Other mattress makers Select Comfort Corp. (NASDAQ: SCSS), Mattress Firm Holding Corp. (NASDAQ: MFRM) and Leggett & Platt Inc. (NYSE: LEG) have all outperformed both Tempur-Pedic and Sealy in share price performance in the past year. Today’s acquisition is likely aimed at beefing up revenues with the expectation that profits will follow.

Shares of Sealy are up 7.5% in premarket trading this morning at $2.30. The stock’s 52-week range is $1.09 to $2.45.

Tempu-Pedic’s stock is up about 5% at $28.10 in a 52-week range of $20.70 to $87.43.

Paul Ausick

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