Sleepy’s was looking for buyer before Mattress Firm offer

Negotiations to sell Hicksville mattress retailer Sleepy’s LLC were well underway by the time eventual buyer, Mattress Firm Holding Corp., entered the bidding, executives said.

Adam Blank, 44, Sleepy’s chief operating officer, who will become president when the company becomes a subsidiary of Mattress Firm, said in an interview Tuesday that talks heated up “a couple months ago” as David Acker, chief executive and grandson of the founder, sought an exit.

“David wanted to take the opportunity and move on to other things in his life,” Blank said of the 59-year-old executive. “David’s been with this business since he left college. He, along with his father, made this business what it is today.”

Asked about the timing of the deal in a conference call on Monday, Mattress Firm chief executive Steve Stagner said that Sleepy’s was in advanced talks with other potential buyers by the time his company got involved.

“We were not the only ones in the process,” he said.

Blank said that the $780 million deal announced Monday is expected to close early next year, but Sleepy’s will operate independently through “most, if not all, of 2016.”

Eighty-four-year-old Sleepy’s has about 3,400 employees, including about 600 at a 450,000-square-foot headquarters and warehouse complex in Hicksville.

Stagner said that about $40 million in “cost synergies” are expected by the third year after the deal closes and that integration of Sleepy’s will proceed at a “measured and disciplined pace.”

Blank acknowledged that in any such deal “there’s always a level of anxiety” for employees, who were assured that the company would be as “transparent as possible.”

The deal also offers employees the opportunity “to become part of the first coast-to-coast mattress retailer,” he said. “We don’t look at it as a Long Island company going away.”

Houston-based Mattress Firm, the nation’s No. 1 retailer specializing in mattresses based on stores and sales, has been active in mergers and acquisitions, with six deals in 2014 alone.

Mattress Firm executives said that the Sleepy’s deal will be financed with cash on hand and $740 million in new debt. Shares of Mattress Firm rose nearly 7 percent to close at $52.79 Tuesday.

Members of the Acker family and management hold a majority of Sleepy’s shares with minority stakes held by private equity firms and the state pension fund. A spokeswoman for state Comptroller Thomas DiNapoli, sole trustee of the $185 billion pension fund, said that New York expects an undetermined profit from its $12.9 million investment in Sleepy’s in 2012.

Combined, Mattress Firm and Sleepy’s operate stores in Hawaii and all of the lower 48 U.S. states except Wyoming. Their market coverage overlaps in eight states on the East Coast, and Illinois and Indiana in the Midwest.

Mattress retailers are facing a new challenge from several upstart companies backed by venture capital that ship mattresses directly to the consumer. Bedgear LLC, a Farmingdale bedding supplier that sells through Sleepy’s and other retailers, is expected to adopt that business model when it begins selling mattresses in early 2016.

By Ken Schachter

kenneth.schachter@newsday.com,james.madore@newsday.comkschach,

Ken Schachter covers corporate news, including technology and aerospace, and other business topics for Newsday. He has also worked at The Miami Herald and The Jerusalem Post.