NEW YORK (TheStreet) -- Mattress Firm Holding Corp. (MFRM)  shares are surging 7.78% to $53.49 in Tuesday's pre-market trading session after the nation's largest mattress retailer announced that it would acquire rival privately-held Sleepy's for $780 million.

The transaction is expected to close in the first half of Mattress Firm's fiscal year of 2016.

"This transformational acquisition unites the nation's two largest mattress specialty retailers, providing customers with convenience, value and choice through our truly border-to-border and coast-to-coast, multi-brand retail stores and distribution network," Mattress Firm CEO Steve Stagner stated.

Additionally, this combination would have about 3,500 stores with over 1,000 stores in Northeast and mid-Atlantic markets.

The companies noted that they expect to generate yearly synergies of about $40 million by the third year post-closing.

Separately, TheStreet Ratings team rates MATTRESS FIRM HOLDING CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

We rate MATTRESS FIRM HOLDING CORP (MFRM) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income, good cash flow from operations, growth in earnings per share and expanding profit margins. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • MFRM's very impressive revenue growth greatly exceeded the industry average of 4.5%. Since the same quarter one year prior, revenues leaped by 61.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 53.0% when compared to the same quarter one year prior, rising from $14.30 million to $21.88 million.
  • Net operating cash flow has significantly increased by 74.72% to $89.36 million when compared to the same quarter last year. In addition, MATTRESS FIRM HOLDING CORP has also vastly surpassed the industry average cash flow growth rate of 4.59%.
  • MATTRESS FIRM HOLDING CORP has improved earnings per share by 48.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MATTRESS FIRM HOLDING CORP reported lower earnings of $1.27 versus $1.54 in the prior year. This year, the market expects an improvement in earnings ($2.39 versus $1.27).
  • 41.30% is the gross profit margin for MATTRESS FIRM HOLDING CORP which we consider to be strong. Regardless of MFRM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.30% trails the industry average.
  • You can view the full analysis from the report here: MFRM