Andrei Popov
The Federal Trade Commission filed a lawsuit Tuesday seeking to block Tempur Sealy’s (NYSE: TPXAnalysts at Piper Sandler said the planned $4 billion acquisition of Mattress Firm has taken the suspense out of Tempur Sealy’s stock.
Regulatory agency files administrative complaint and authorizes The U.S. Federal Trade Commission said in a statement that the company had filed suit in federal court to block the deal, alleging that Tempur Sealy, the world’s largest mattress supplier and manufacturer, had the ability and motivation to “inhibit the competition” and raise mattress prices. statement Tuesday. The commission voted 5-0 to authorize a lawsuit challenging the deal.
“The bottom line is that we think TPX stock looks attractive right now regardless of whether it acquires a mattress company,” Piper Sandler analyst Peter Keith wrote in a note on Tuesday. “We still expect TPX to file a lawsuit And ultimately won in court.”
Even if the acquisition is ultimately blocked, TPX remains attractive as a “major market share grower at the bottom of the industry cycle” and has the potential to repurchase 10-15% of outstanding shares over the next 12 months, which Keith has an Overweight rating to add. Dow has a target price of $61 for TPX.
Piper’s Keith noted that Tempur Sealy (TPX) appears to have strong legal grounds to challenge the Federal Trade Commission because it has signed supply agreements with all but one of its existing mattress company suppliers. Keith also pointed out that TPX would not have any problem divesting 200 stores as this may raise competition concerns in certain markets.
The best argument for Tempur-Pedic (TPX) may be that the combined Tempur-Pedic/Mattress company could become a formidable competitor to Amazon (AMZN), which has “quietly become the most dominant player in the industry.” Mattress Retailers,” with an estimated 30% industry share unit, Keith wrote.
Keith added: “The TPX/MFRM merger will pose a stronger challenge to AMZN, especially at the lower end (<$500 price point) of the market."
Wedbush analyst Seth Basham believes that the chance of the deal succeeding and overcoming the FTC court challenge is more than 50%. If TPX is unable to complete the deal, he sees the possibility of a leveraged buyback of up to about 12% of the stock. Basham has an outperform rating and $66 price target on Tempur Sealy ( TPX ).
