July 2 (Reuters) - The U.S. Federal Trade Commission is

preparing to sue to block the $4 billion merger between mattress

manufacturer Tempur Sealy International Inc ( TPX ) and retailer

Mattress Firm, a source familiar with the matter said on

Tuesday.

Tempur Sealy ( TPX ) had announced the cash-and-stock deal in May

2023, seeking to add Mattress Firm's more than 2,300

brick-and-mortar store locations. The combined company would

have about 3,000 stores globally.

One of the FTC's concerns about the deal is its impact on

manufacturing jobs, the source said.

The vast majority of mattresses purchased in the U.S. are

made domestically, with around $7.8 billion in sales last year,

compared with around $809 million in imports, according to

statistics compiled by the International Sleep Products

Association.

The FTC under Chair Lina Khan has scrutinized how mergers

potentially diminish workers' bargaining power in specific labor

markets.

That concern is among those animating the agency's efforts

to block a merger between grocery chains Kroger ( KR ) and

Albertsons ( ACI ).

Tempur Sealy ( TPX ) has said it expected to complete the purchase

of Mattress Firm in the second half of 2024.

To address potential regulatory concerns, Tempur Sealy ( TPX ) has

said it could divest some stores, and in May said it signed

agreements with six other mattress makers for Mattress Firm

stores to continue carrying their brands.

The merger agreement includes a $50 million break-up fee for

FTC issues and a maximum store divestiture limit, Tempur Sealy ( TPX )

CEO Scott Thompson said last year.