The $4 billion takeover by bedding group Tempur Sealy International (NYSE:TPX) of Mattress Firm Group Inc is facing a legal challenge from the US antitrust agency.
Overnight, the Federal Trade Commission took the deal to federal court to block the combination of the largest US mattress maker with the biggest bedding retailer.
A merger would have "the ability and incentive to suppress competition and raise prices for mattresses for millions of consumers."
"Through emails, presentations and other deal documents, Tempur Sealy has made it abundantly clear that its acquisition of Mattress Firm is intended to kneecap competitors and dominate the market," said FTC's Bureau of Competition chief Henry Liu in a statement.
Tempur Sealy said it had been "working constructively" with the FTC and so was "disappointed that the FTC has initiated litigation".
It said it believes the FTC's perspective "does not reflect all the relevant facts and law", as the bedding industry is highly competitive, with only a "small fraction" of the thousands of brick-and-mortar US storefronts operated by Mattress Firm.
Tempur Sealy said it is open to addressing FTC concerns and has engaged with Mattress Firm suppliers on post-merger supply agreements.
"We are confident in the procompetitive rationale for this transaction and look forward to presenting the many benefits of the combination. We believe that a successful litigation process can be completed in the coming months, which would allow us to close the transaction in late 2024 or early 2025," the bedding group said.