September 27, 2012 / 12:52 PM / 5 years ago

Tempur-Pedic to buy rival Sealy as specialty bed dominance slips

(Reuters) - Tempur-Pedic International Inc (TPX.N) will acquire rival mattress maker Sealy Corp ZZ.N for about $242 million and assume about $750 million in debt, as rivals snip away at its once-dominant position in specialty beds.

Tempur Pedic, which pioneered the specialty beds market with foam-based technology developed by NASA, is attempting to regain market share from fast-moving rivals that are also chasing the burgeoning market for foam mattresses, popular with aging baby boomers.

The offer price of $2.20 per share represents a 3 percent premium to Sealy’s Wednesday close of $2.14. Sealy shares were trading above the offer price at $2.22 in pre-market trade on Thursday, indicating that some investors expect a higher offer.

Tempur-Pedic shares were up 8 percent at $28.98.

Tempur-Pedic said it had received consent from shareholders holding about 51 percent of Sealy, the long-time market leader. It said no other shareholder approvals are needed to complete the deal.

Private equity firm Kohlberg Kravis and Roberts & Co (KKR.N) owns about 44 percent of Sealy, a remnant of its $1.5 billion deal in 2004 to take the company private.

Earlier this year, Sealy’s second-largest shareholder, H Partners, launched an attack on KKR, accusing it of wiping out 90 percent of the mattress maker’s value, saddling it with debt, and milking it for fees.

    Tempur-Pedic said it has secured $1.77 billion in financing from Bank of America for the deal and to pay down existing Sealy and Tempur-Pedic debt. Tempur-Pedic had long-term debt of $680 million as of June 30.

    Merrill Lynch will act as lead arranger and bookrunning manager for the debt.

    After the deal, Tempur-Pedic and Sealy will continue to operate independently and Sealy Chief Executive Larry Rogers will remain CEO of Sealy and report to Mark Sarvary, Tempur-Pedic’s CEO.

    Reporting by Juhi Arora and Arpita Mukherjee in Bangalore; Editing by Akshay Lodaya, Anthony Kurian and Ted Kerr

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