NEW YORK - Mattress rivals Tempur-Pedic and Sealy are becoming bedfellows.
Tempur-Pedic, the 20-year-old leader in foam mattresses, is buying more-than-a century-old rival Sealy for about $228.6 million in cash.
The acquisition comes as competition has increased in the mattress industry, with makers stepping up their marketing and promotions to help lure cost-conscious consumers into making big purchases.
Tempur-Pedic International Inc. said Thursday that it will pay $2.20 per Sealy share, which is a 3 percent premium to the company's Wednesday closing price of $2.14.
Sealy, based in Trinity, N.C., currently has about 103.9 million outstanding shares, according to FactSet. Its stock rose 5 cents, or 2.3 percent, to $2.19 per share in heavy afternoon trading. Volume of more than 27.9 million shares was more than 38 times normal trading in the stock.
Tempur-Pedic says it will also assume or pay back all of Sealy Corp.'s outstanding debt. The Lexington, Ky., company plans to finance the acquisition with debt. Its shares soared $3.46, or nearly 13 percent, to $30.24 in afternoon trading, with volume more than seven times normal trade. Earlier in the session, shares peaked at $32.97.
The companies put the total value of the deal at $1.3 billion, including debt. They say that the transaction will create a $2.7 billion global bedding company.
"Tempur-Pedic and Sealy together will have products for almost every consumer preference and price point, distribution through all key channels, in-house expertise on most key bedding technologies, and a world-class research and development team," Tempur-Pedic CEO Mark Sarvary said in a statement.
Tempur-Pedic and Sealy will run independently of each other, with Sealy's CEO Larry Rogers remaining in that position. Rogers will report to Sarvary.
Tempur-Pedic, founded in 1992, makes and distributes mattresses and pillows in more than 80 countries under its Tempur and Tempur-Pedic brands. The company borrowed the memory foam technology developed by NASA. Memory foam mattresses conform to users' shape and position by reacting to their body temperature and weight.
Sealy, which was founded in 1881, makes a broad array of spring coil beds under brands including Stearns & Foster, Sealy and Sealy Posturepedic.
While Tempur-Pedic has a particularly strong presence in North America, Europe and Asia, Sealy has a strong presence in North America, Asia and Argentina. Sealy also has strong brand recognition through its international licensees and joint ventures.