Mattress Firm to acquire big rival

Area manager David Bucklew adjusts a pillow at the Mattress Firm on West Gray earlier this year. Area manager David Bucklew adjusts a pillow at the Mattress Firm on West Gray earlier this year. Photo: Dave Rossman, Freelance Photo: Dave Rossman, Freelance Image 1 of / 1 Caption Close Mattress Firm to acquire big rival 1 / 1 Back to Gallery

Mattress Firm has agreed to acquire a competing chain, Sleepy's, in a $780 million deal that would give the Houston-based company access to new territory in the mid-Atlantic and the Northeast while combining the nation's two biggest specialty mattress retailers.

Company officials said the acquisition would make Mattress Firm the first truly national coast-to-coast retailer of its kind.

The combined company would have some 3,500 retail locations and 80 distribution centers in 48 states and generate sales of more than $3.6 billion, CEO Steve Stagner said in a statement.

He called the deal "an important next step in building our national store network" and said Mattress Firm would "benefit from national scale in key areas including distribution, customer delivery, advertising, sourcing and procurement, and operating expenses."

He predicted annual savings of $40 million by its third year. The sale is expected to close during the first half of next year.

Sleepy's, with 1,050 stores in 17 states, will operate under both the Mattress Firm and Sleepy's brand names. Sleepy's stores will operate as they are through "the greater part" of 2016, Stagner told investors and analysts during a conference call Monday. It will keep its office in New York, and chief operating officer and general counsel Adam Blank will join Mattress Firm's executive staff.

Stagner told analysts his company was one of several interested in the Sleepy's acquisition, but Mattress Firm was the only one strategically positioned to move on the acquisition.

Mattress Firm expanded dramatically in 2014, snapping up 668 stores through buying competing chains. But less than three months ago, company officials announced they would hold off on new acquisitions through at least the end of the fiscal year, Jan. 30. That announcement was made during an earnings report that missed analysts' expectations and sent the company's stock plunging 23 percent in a single day.

At the time, the company told investors it wanted to continue to work to integrate the new stores into its existing network.

Stagner said Monday that reorganizations over the last year have helped the integration and he said the company has learned from the experience.

He said the company's results in the third quarter "prove that we have the business on track."

Stagner added that Mattress Firm probably won't begin to integrate Sleepy's into its operations until well into the first or second quarter of next year, "because we have regulations to go through, and it's going to take quite a bit of time."

Stagner said the company is confident it can integrate in 2016 and added that there's good, stable leadership from Sleepy's joining Mattress Firm.

Also Monday, Mattress Firm released its preliminary third-quarter earnings. It reported same-store sales growth of 3.8 percent, with net sales of $669.5 million. It will give its full report next week.

The announcements came after trading closed. Shares of Mattress Firm rose nearly 10 percent in aftermarket trading, the Associated Press reported.