Leggett & Platt, a manufacturer that also produces automotive parts, will expand Somnigroup's operations beyond the bedding sector upon joining the company.

Somnigroup International Inc. has agreed to acquire component manufacturer Leggett & Platt in an all-stock transaction valued at $2.5 billion. This move finalizes a multi-month plan to purchase the core supplier for its bedding empire.

Under the terms, shareholders of Leggett & Platt will receive 0.1455 shares of Somnigroup common stock for each share they own. Following the completion of the transaction, Leggett & Platt's shareholders will hold approximately 9% of the combined entity.

Somnigroup, formed after Tempur-Sealy's acquisition of a mattress firm, had previously made a $1.63 billion offer for Leggett & Platt in December. That bid represented a 30% premium over Leggett & Platt's 30-day average closing price at the time.

Leggett & Platt initially rejected the offer but entered into a confidentiality agreement and a six-month quiet period with Somnigroup to facilitate due diligence and explore a potential deal.

Somnigroup's CEO, Scott Thompson, stated in an interview that the company had been monitoring Leggett & Platt for five years but only recently engaged in acquisition discussions.

"Our initial letter of intent took them by surprise, so they needed 30 to 45 days to assess the situation. Over the past month, only minor outstanding issues remained, and the path forward became very clear," Thompson said. He described the negotiation range as "quite narrow," leading to a smooth agreement.

Thompson explained that Somnigroup waited several years because Leggett & Platt needed to optimize its balance sheet and adjust production processes to align with current capacity. Once these adjustments were made, the market had not yet priced in the company's future growth, presenting an ideal acquisition opportunity.

He also noted that both the bedding market and other sectors where Leggett & Platt operates are at cyclical lows, allowing Somnigroup to secure the purchase at a more favorable price.

Somnigroup indicated that the acquisition supports its vertical integration strategy, enabling tighter coordination between component development and mattress design.

Thompson emphasized that controlling key suppliers while expanding the company's overall scale will help mitigate supply chain challenges and market volatility caused by tariffs and conflicts in the Middle East. A larger scale enhances bargaining power with suppliers when addressing tariffs and allows for greater investment in chemical raw material reserves to counter potential disruptions from conflicts involving Iran.

The company continues to engage with other firms to advance its vertical integration strategy. "We are currently in discussions with several retailers globally, mostly smaller players, and are also talking with various suppliers worldwide, also primarily smaller enterprises. It is uncertain whether another acquisition will follow," Thompson noted.

Somnigroup expects the transaction to reduce financial leverage, boost profitability, and generate cost savings in procurement, operations, and product innovation.

Leggett & Platt's involvement in automotive parts manufacturing will also diversify Somnigroup's business beyond bedding. "We aim to diversify revenue streams, which will make the overall platform more resilient rather than relying solely on a single industry," Thompson added.

The deal is anticipated to close by the end of this year.