Terms of the deal call for Tempur-Pedic to pay $2.20 per share for Sealy, a premium of 3% over Wednesday's close, for total equity consideration of $242 million. The Lexington, Ky.-based buyer will also assume or repay all of Sealy's outstanding convertible and nonconvertible debt.

Tempur-Pedic intends to finance the acquisition through debt financing, for which Bank of America Merrill Lynch has already provided customary commitment letters.

Shares of Trinity, N.C.-based Sealy traded above the takeout price on Thursday morning on apparent hopes of a higher bid. But even if investors are dissatisfied, they appear to have few options. Tempur-Pedic said that stockholders owning about 51% of Sealy's stock have executed a written consent approving the transaction, meaning no additional shareholder approvals are needed to complete the transaction.

Affiliates of Kohlberg Kravis Roberts & Co. LP control at least 44% of Sealy. KKR bought the company in 2004 from Bain Capital LLC, and took it public in June 2005.

Tempur-Pedic said the combination would offer a full spectrum of bedding products from high-end to commodity products. Sealy generated $1.2 billion in sales in its fiscal 2011 selling mattresses and other bedding products manufactured at 25 plants in North America and sold at more than 11,000 retail outlets. The company also has a large business serving the hospitality industry.

"This is a transformational deal that brings together two great companies, each with globally recognized brands," Tempur-Pedic CEO Mark Sarvary said in a statement. "The shared know-how and improved efficiencies of the combined company will result in tremendous value for our consumers, retailers and shareholders."

Post-deal, Tempur-Pedic and Sealy will operate independently, with Sealy CEO Larry Rogers remaining in his role and reporting to Sarvary. Rogers, who has been with Sealy for 33 years, in a statement said that "together, we believe we can deliver more value than either business could on its own by leveraging our strong combined assets."

The companies said they expect to trim upward of $40 million in costs from the combined business.

Tempur-Pedic was advised by BofA Merrill Lynch and a Bingham McCutchen LLP team led by John Utzschneider and including Bill Berkowitz, Brandon Bigelow, Scott Bluni, Benjamin Burkhart, Jim Black, Anthony Carbone, Natascha George, Russ Isaia, Amy Kyle, Christina Melendi, Amy Mugherini, Lou Rodriques, Carl Valenstein and Mike Wigmore.

Citigroup Inc. and Simpson Thacher & Bartlett LLP advised Sealy, with Perella Weinberg Partners LP and Blank Rome LLP acting as advisers to an independent committee of Sealy's board.