Mattress maker Tempur Sealy International’s (TPX) $5 billion acquisition of Mattress Firm Group could lead to savings significantly higher than current $100 million estimates.
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Market Share Could Jump
Analysts at Wedbush said that although Tempur, during a recent investor call, did not explicitly reiterate that it believes it can save $100 million from the deal completed last week, it sees “substantial synergy opportunities in advertising, brand awareness, product innovation, and streamlining the consumer purchasing process”. Wedbush also noted that about 75% of Mattress Firm’s store slots do not have long-term commitments with any brand, leaving more room for the merged company to grow. Wedbush added that Tempur anticipates capturing most synergies in years 2 and 3 following the acquisition, a faster timeline than its initial four-year outlook.
Savings Could Be Three Times Higher
Indeed, Wedbush believes total synergies could be 2-3 times higher than the original forecast and expects Tempur to revise its projections later this year. Tempur plans to provide more financial details when it reports its Q4 earnings later this month. Given the positive bounce in sentiment Wedbush Securities reiterated its Outperform rating on the mattress maker and $80 price target. It did little to move the TPX share price however with it rising only 0.17%.
Tempur Sealy chairman and chief executive Scott Thompson last week said the deal would “unlock incremental benefits for all stakeholders by accelerating our U.S. omni-channel strategy”. He said having a global bedding company would drive product innovation, improve both customer service and quality. As part of the deal Tempur Sealy also said that from February 18th this year it would change its name to Somnigroup International comprising Mattress Firm, Dreams and Tempur Sealy. They will operate as decentralized business units.
Is TPX a Good Stock to Buy?
On TipRanks, TPX has a Strong Buy consensus based on 8 Buy ratings. Its highest price target is $80. TPX stock’s consensus price target is $76.60 implying an 18.59% upside.
