In a rare instance — and in the thick of the holidays — Tempur Sealy and Serta Simmons Bedding both made the national news for two very different reasons.
If you weren’t excited for the new year already, buckle up and prepare for a bumpy ride.
According to Bloomberg, Tempur Sealy and Mattress Firm have promised to make more retail space available to rival mattress suppliers if the FTC approves the merger. The official plan is to keep its current percentage of premium mattresses (retailing for $1,500 or more) from other producers for five years. This may sound like a concession, but the FTC has other thoughts.
They responded by saying that this could make things worse because it allows Tempur to judge its compliance and allows it to drop the commitment whenever it wants to.
I have to side with the FTC on this one. This seems like a temporary solution that leaves the door open for Tempur to drop it without repercussions.
We know that Tempur plans to use the acquisition to gain market dominance — remember the emails and texts obtained by the FTC? Here’s a recap:
- Mattress Firm is referred to as a “kingmaker” by both Scott Thompson, Tempur Sealy CEO, and Mattress Firm executives because of its ability to make mattress brands successful. That’s a pretty eerie term for a mattress retailer, and it insinuates something more sinister.
- Serta Simmons Bedding, Nectar and Purple were specific targets of Tempur. About Nectar, the document said a Tempur Sealy vice president wrote “hopefully we buy (Mattress Firm) and take them off the floor.” The court file alleges a vice president of a Tempur Sealy subsidiary said depending on Serta Simmons’ competitive response, Thompson “will push them completely out the door at (Mattress) Firm.”
- Casper was also allegedly pushed off the floor by an under-the-table handshake agreement between Mattress Firm and Tempur, the court file says. The complaint alleges that Thompson told Tempur Sealy executives to “please inform them that if Casper goes on the floor we will be rolling out 500 Sleep Outfitters stores in their market. … Our rollout will hurt there (sic) IPO and when their shareholders ask me why we rolled out stores, I will tell them Casper issue they did not honor. … Someone will be fired.”
Judge Charles Eskridge in the U.S. Court for the Southern District of Texas, who oversaw the FTC’s complaint against Tempur, said the mattress manufacturer’s planned commitment to premium mattress slots from other manufacturers after the closing of the proposed acquisition was lower than Mattress Firm currently has in place.
Related: A big week for Tempur Sealy
To fix this, Tempur proposed allowing third-party mattresses to be placed in at least 43% of premium slots (on average) across all open Mattress Firm stores. The previous commitment had been to reserve 28% of the floor for other mattress suppliers.
A federal court’s decision on the merger is expected by Jan. 30.
Serta Simmons Bedding made the news last week as the 5th U.S. Circuit Court of Appeals ruled that SSB did not treat its lenders equally in a controversial 2020 debt deal. Reuters reports that the courts said similar deals involving so-called “lender-on-lender violence” may be inappropriate.
Luckily for the company, its 2023 bankruptcy restructuring plan was not completely revoked, but it “removed indemnification provisions that would have protected its lenders from litigation over the disputed debt deal,” Reuters says.
“Serta Simmons’ bankruptcy handed the company’s equity to a group of select lenders, while other lenders received far less than the face value of their debt,” the Rueters report continues. “Lenders that were on the losing end of the transaction appealed, alleging that Serta and its preferred lenders had stacked the deck in bankruptcy in a 2020 debt deal. The earlier debt deal granted additional leverage to some, but not all, of the lenders that had provided $2.4 billion in loans to the company, according to court filings.”
Serta was allowed to borrow $200 million in 2020 when it filed Chapter 11, but the 5th Circuit opinion says it placed the participating lenders at the front of the line for repayment and devalued the debt held by nonparticipating lenders.
Because it moved a group of lenders ahead of others that had previously been on an equal footing, the deal is being referred to as an “uptier” transaction
To put it plainly, this doesn’t look great for SSB. Even after the Chapter 11 bailout, the company has been struggling to regain floor slots. Its brand name took a hit at a unique time — when Covid hit. And when other manufacturers upped their game, legacy brands felt it.
And to say what everyone is thinking, there’s a chance the blowback from this could send SSB right back into bankruptcy.
The SSB brand will never go away — even if it goes bankrupt again and doesn’t file Chapter 11, another company will buy it before it goes out of business. However, at its heart, this is an unfortunate happening caused by the board, and it’s going to affect the company’s business negatively.
Between Tempur’s continued battle with the FTC and Serta’s legal troubles, 2025 is shaping up to be a busy and exciting year for the bedding industry.
