Antitrust officials at the Federal Trade Commission could have some sleepless nights over today's announcement that the nation's second and third largest mattress makers intend to combine.
The deal, which is subject to FTC review, calls for a private equity group and a pension fund to acquire the bedding unit of Simmons Co., the number two mattress maker by revenue in the country, for $760 million. Simmons is filing for Chapter 11 bankruptcy and implementing a plan to restructure its debt.
The catch: the private funds - Ares Management and Teachers’ Private Capital - also own National Bedding Co,. maker of Serta brand mattresses, which is number three in revenue. Almost invariably, a combination of the second and third largest players in an industry will attract intense scrutiny by antitrust officials.
In a press release, Ares and Teachers said they intend to operate the companies as separate units that will continue to compete with each other in the market. They also said the companies will retain their unique corporate and brand identities. But will that be enough to pass FTC review?
"With common ownership, the FTC will probably treat them as a combined entity," said Richard Parker, a DC-based partner at O’Melvey & Myers who headed the FTC’s bureau of competition from 1999 to 2001. "In recent years, 3 – 2 deals have not been impossible, but they are certainly very difficult and will get a serious look."
Simmons has retained Helene Jaffe, a New York-based partner at Weil Gotshal & Manges as antitrust counsel. She could not be reached immediately for comment. Weil lawyers also advised on the deal.
Ayes and Teachers were represented by Sullivan & Cromwell in the transaction. A company spokesman did not know the antitrust counsel.
A Federal Trade Commission spokesman declined to comment on the deal.