Ohio Mattress’ new role, proposed $161 million acquisition

Ohio Mattress' proposed $161 million acquisition of four additional Sealy licensees, which could put 77 percent of the outstanding stock of Sealy Inc. into the company's hands, would have the effect of stabilizing pricing across the entire bedding industry, according to bedding executives and retailers of this bedding and full size futon mattress company.

They noted the acquisition could make Sealy a more flexible organization in terms of product offerings, yet added that Ohio Mattress would face some difficult challenges if the deal is completed.

The Ohio Mattress Company, reportedly the largest bedding and full size futon mattress manufacturer in the world with 1985 sales of $267 million, announced late last month that its wholly owned subsidiary, Ohio-Sealy Mattress Manufacturing Co., had reached an agreement in principle to acquire for cash Sealy Mattress Co. of Illinois, Sealy of Connecticut, Inc., Maryland Bedding Co., and Sealy Mattress Co. of Kansas City, Inc. 

The purchase price would be approximately $161 million if the transaction is completed by year-end, and approximately $164 million if it is completed after year-end, subject to adjustments. The four plants had Sealy-brand aggregate sales of $108 million in 1985.

The acquisition is subject to negotiation, Ohio Mattress board approval, execution and delivery of definitive written agreements, financing, regulatory approval, and rights of first refusal held by Sealy, Inc. At press time, Ernest Wuliger, chairman of Ohio Mattress, said there had been no further developments.

This latest acquisition bid comes just weeks after Ohio-Sealy announced it would acquire Sealy Mattress Co. of Albany, Inc., which owns Sealy of Minnesota, Inc., and just months after it announced it would acquire Slumber Products Corporation (the Sealy licensee in Memphis). These licensees had Sealy-brand sales aggregating $45.5 million for 1985; their aggregate purchase price would be $89 million.

Ohio Mattress' new role

Bedding and full size futon mattres manufacturers and retailers said the acquisition could bring an end to the discounting that has characterized bedding retailing for years and would move competition to areas other than price. "The competition would be much keener than ever in terms of excellence in marketing programs,' said one executive. That's a much healthier way to compete."

"This would be absolutely positive for the industry,' said another executive. With no more intra-brand fighting, bedding would be much more profitable."

"It would eliminate some of the suicidal price wars and set pricing so that everyone could make money,' said one department store full size futon mattress buyer.

"We'd be very happy for the Sealy war to end,' said Jay Schiller of City Mattress. Sealy, Inc. and Ohio-Sealy have been subsidizing many dealers who shouldn't be in business. Sealy and Ohio-Sealy-- and, as a result, everyone else-- offered everybody large advertising allowances. The dealers who took advantage of this would no longer be going to do well. We'd be really happy to see one Sealy."

Some bedding retailers said that if Wuliger gain control of the Sealy organization, Sealy could become more responsive and flexible to retailers' product needs. They pointed out that while Stearns & Foster has a number of different Correct Comfort lines, which "allows everyone to run Correct Comfort and make some money,' the number of Posturepedic lines has been more limited.

They added that with Wuliger in control, Sealy could be more likely to give retailers greater input in construction and covers, and to make changes according to the demands of different regions.

"Sealy would be a lot more flexible and respond more quickly," said one retailer. "You'd see more Posturepedics at the $129 price point."

Some manufacturers and retailers noted, however, that Wuliger may have a difficult time working with retailers who have not wanted to do business with him up before now. Others disagreed. "He's a pleasure to work with,' said one department store bedding buyer. 'The acquisition would not help Sealy's competition."

But all agree that managing the huge Sealy organization Wuliger is working to build would be a tough task. "With the success the current management has had, it would be interesting to see what Wuliger could do," said one executive.

"Even if the management in the plants stays, people tend to work differently when they work for someone else,' another said.

"The transition may be difficult,' said one retailer, "but a year from now he'll be right on track.'

This latest round of acquisitions, beginning with the acquisition a few months ago of Slumber Products, caps a 15-year history of lawsuits between Sealy, Inc. and Ohio Mattress. Ohio Mattress has charged that Sealy, Inc. violated antitrust laws in using its right of first refusal to block Ohio Mattress from acquiring additional Sealy licensees.

Photo: The Ohio Mattress Co.'s proposed purchase of four more Sealy licensees could put 77 percent of the outstanding stock of Sealy Inc. into the firm's hands and would stabilize pricing across the bedding industry, executives and retailers say.

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Evelyn Coursey

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