Shares of Plymouth-based Select Comfort and Tempur Sealy International got a big bump late this week as rumors once again surfaced that Tempur might make a bid to acquire the maker of Sleep Number beds.
The stock steadied on Friday, closing at $35.49. Select Comfort's share rose 11.3 percent Thursday to close at a 52-week high of $35.60 a share. It is up 57 percent year-to-date. Tempur Sealy's stock rose .68 percent Friday to $53.39 a share.
Select Comfort officials said they don't comment on market rumors, but some analysts pointed out flaws in a merger strategy.
Lexington, Ky.-based Tempur Sealy is bigger than Select. Tempur Sealy has annual revenue of $3.1 billion; Select Comfort has $1.3 billion in sales. Tempur Sealy also carries a market cap of $2.9 billion, compared with Select's $1.5 billion.
Yet Select Comfort currently has better market momentum than Tempur Sealy. Last year, Select Comfort's sales rose 8 percent while Tempur Sealy's sales did not grow.
Tempur Sealy makes and sells bedding products including traditional mattresses and foundations as well as the bed-in-a-box brand, Cocoon, which it has sold online since March 2016.
The acquisition rumors have been floated before but may be drawing renewed interest after Tempur Sealy lost a key distribution partner earlier this year.
In January, Tempur Sealy's stock lost nearly one-third of its value when the company announced it had severed its relationship with the largest U.S. specialty-bedding retailer, Mattress Firm. At that time, Tempur Sealy's stock was trading nearly $10 per share higher than it closed on Thursday.
Mattress Firm, with more than 3,500 stores across 49 states, was Tempur Sealy's largest retailer, moving 21.4 percent of its 2016 revenue.
Select Comfort has its own proprietary retail distribution network with 550 stores in the U.S.
Budd Bugatch, an analyst with Raymond James, discounted the rumors in a research note. "It did not make, in our view, good strategic sense then and does not today for several reasons," Bugatch wrote.
He noted that Sleep Number's purchasing experience is different, the Sleep Number stores are tight with little room to display other products and that Tempur Sealy already carries a lot of corporate debt.
Scott Link, senior portfolio manager for Minneapolis-based Disciplined Growth Investors, thinks it would be shortsighted for Select Comfort's management to consider any offers at this time.
Disciplined Growth is the fifth largest shareholder of Select Comfort and has been a long-term investor. It currently owns a nearly 9 percent stake in the company.
"To be perfectly honest, they have got a ton of open-field running in front of them as an independent company," Link said.
Patrick Kennedy • 612-673-7926