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Piper Sandler offers insight and opinion on FTC-blocked TSI/Mattress Firm deal

Piper Sandler offers insight and opinion on FTC-blocked TSI/Mattress Firm deal

Leading investment bank Piper Sandler offered interesting insight into the FTC’s vote to block Tempur Sealy’s acquisition of Mattress Firm, explaining that it believes the FTC’s decision to block was largely expected.

“We think TSI shares currently look attractive with or without the Mattress Firm acquisition,” Piper Sandler says. “We still expect TSI to pursue litigation and ultimately win in court.”

It lays out these predictions:

“The two primary arguments against the acquisition appear to focus on (1) potential for higher prices for consumers; and (2) rival suppliers could suffer, which in turn could hurt American manufacturing jobs.

“Timing of these reports align with the FTC’s calendar which shows a Closed Commission Meeting occurred July 1. TSI has consistently stated their intent to pursue litigation in court if the FTC’s decision was to block the deal — and TSI has consistently held their timeline to close (assuming litigation) at mid- to late-2024 (litigation would push the close to late 2024). We also believe TSI’s legal team has run a litigation preparation process in parallel with the FTC’s review process.”

Could Tempur Sealy win in court? Potentially 

Piper Sandler points out that Tempur has signed supply agreements with all but one existing Mattress Firm supplier — which should reduce concerns that rival suppliers could suffer.

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“We have also noted that TSI will have no trouble divesting 200 stores that would otherwise raise competitive concerns in specific markets,” it says. “Finally, we have long believed TSI’s strongest argument in court is that Amazon (covered by Champion) has quietly become the most dominant mattress retailer in the industry with an estimated 30% share of industry units (and growing).”

It asserts that a combined Tempur Sealy/Mattress Firm would present a stronger challenger against Amazon, particularly in the lower-end, under $500 price points.

“In fact, we would strongly argue that Amazon’s stunning market share gains over the last eight years have already had (and will continue to have) a negative impact on U.S. manufacturing and retail jobs — as a vast majority of its success with low-priced mattresses come from imported bed-in-a-box products.”

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