• by Thom Forbes  @tforbes, December 1, 2015

Houston-based Mattress Firm Holding Corp., the nation’s No. 1 purveyor of specialty mattresses, is buying its No. 2 rival, Hicksville, N.Y.-based Sleepy’s, for $780 million. 

The acquisition of the latter’s more than 1,050 stores in 17 states will put Mattress Firm’s retail operations into every state except Alaska and Wyoming with nearly 3,500 outlets served by 80 distribution centers and pro forma sales pegged at more than $3.6 billion. It plans to operate under both the Mattress Firm and Sleepy's brands in the near term, according to the release announcing the deal.

“Company officials said the acquisition would make Mattress Firm the first truly national coast-to-coast retailer of its kind,” writes Mike D. Smith for the Houston Chronicle, with annual saving of $40 million by the end of its third year. It will be entering Massachusetts, Vermont, New Jersey, Maryland, Connecticut and Rhode Island for the first time, it said on a conference call, Reuters’ Ramkumar Iyer reports.

“Our combined company will be able to further benefit from national scale in key areas including distribution, customer delivery, advertising, sourcing and procurement, and operating expenses,” says Mattress Firm CEO Steve Stagner in the statement.

When the deal closes — expectations are by August of 2016 — Adam Blank, Sleepy’s current COO and general counsel, will join Mattress Firm’s executive team as Sleepy’s president.

“I look forward to partnering with David Acker during this transition period, as we bring together these two great companies that share a strong focus on culture, the customer and overall service experience,” says Stagner.

The deal represents the end of an era for the Acker family, Josh Kosman reports for the New York Post. It has controlled what is now Sleepy’s since Louis Acker opened his first store, Bedding Discount Center, in Brooklyn in 1931. Sleepy’s — “home of the only Mattress Professionals,” according to the company timeline — opened its doors in 1957 under the guidance of Louis’ son, Harry. 

“Now about 80,” Harry “really expanded the chain,” Kosman writes. “Sometimes the younger Acker would build several Sleepy’s stores around a competitor’s store and drive that store out of business.” 

Harry’s son, David, has been president of Sleepy’s since 2001, according to Wikipedia. Over the years, Sleepy’s has acquired such competitors as Klein Sleep, Rockaway Bedding and, most recently, Dial-A-Mattress.

“Mattress Firm has grown through several acquisitions in recent years, including the 2014 purchase of Sleep Train for about $425 million,” Josh Beckerman writes for the Wall Street Journal. It lowered its full-year earnings guidance in September, Beckerman reports, but “said Monday that it posted a strong third quarter, with net sales rising 50.7% to $699.5 million as same-store sales rose 3.8%.”

That was a reversal of recent performance.

“Mattress Firm agreed to the takeover after sluggish demand and discounting weighed on its results, dragging down its stock over the past year. The shares are down 31% in the trailing 12 months,” Bloomberg’s Nick Turner reports. 

But investors weren’t losing any sleep over the deal last night, which was announced after trading closed Monday. “Shares of Mattress Firm rose $4.59, or 9.3%, to $53.95 in aftermarket trading after the deal and the preliminary results were announced,” the AP reports.

Earlier this year, Bloomberg’s Sam Grobart did a piece investigating Sleepy’s ubiquitous presence in Manhattan — “Why Are There So Many Sleepy's Mattress Stores? — pointing out that its more than 30 locations added up to more than the Gap (13), Whole Foods (seven) and Best Buy (six) combined. There are several reasons why the strategy make sense business-wise, he proffers, although Sleepy’s itself declined to participate in the story. But perhaps the biggest is the fact that profit margins in the business are said to be up to 50% per mattress. 

“With numbers like that, you don’t have to move a lot of them to have a really good day,” Grobart surmises.

There was no immediate word on the fate of Sleepy’s jingle, itself a soporific, which ends: “Trust Sleepy's … for the rest of your life.”