Investing.com -- Mattress Firm (O:MFRM), the nation's largest specialty mattress retailer, announced on Monday that it has entered into an agreement to acquire HMK Mattress Holdings, the holding company of rival Sleepy's in a $780 million merger.
The merger unites the top two mattress companies in the U.S. forming a new venture that is expected to generate annual synergies of approximately $40 million by the third year following the close of the deal, Mattress Firm said. Sleepy's currently operates more than 1,000 stores in 17 states in the Northeast, New England, Mid-Atlantic and Midwest regions. In addition, the combined company expects to receive future income of more than $11 million annually in tax benefits for up to 10 years from the goodwill generated by the deal.
“This transformational acquisition unites the nation’s two largest mattress specialty retailers, providing customers with convenience, value and choice through our truly border-to-border and coast-to-coast, multi-brand retail stores and distribution network,” said Steve Stagner, Mattress Firm’s chief executive officer. “Over the years we have admired Sleepy’s for the strong business they have built. The Acker family has a long history in the mattress specialty retail industry through four generations and over 58 years."
"I look forward to partnering with David Acker during this transition period, as we bring together these two great companies that share a strong focus on culture, the customer and overall service experience.”
In total, the combined company will operate nearly 3,500 retail stores and 80 distribution centers across 48 U.S. states. The new company expects low single-digit per share earnings growth over its first year before expanding into double digit growth by the third year post-closing.
"Both Mattress Firm and Sleepy’s are excited about the opportunities this combination will create for our over 10,000 collective employees, as well as our customers, vendors, business partners and shareholders," Stagner added. "We look forward to adding the talented mattress professionals at Sleepy’s to our family."
Mattress Firm also reported preliminary net sales for its third quarter of $699.5 million for the third quarter, an increase of 50.7% on a year-over-year basis. It came as comparable-store sales growth surged by 3.8% for the 13-week period that ended in early-November.
Shares in Mattress Firm gained 3.52 or 7.13% to 52.88 in after-hour trading.