Bloomberg News

Sealy Directors Under Hedge-Fund Criticism Lose Votes

April 24, 2012

Sealy Corp. (ZZ:US), the mattress maker that is 45 percent owned by private-equity firm KKR & Co. (KKR:US), said more than 30 percent of its shareholders withheld support for three directors after the company faced governance criticism.

Gary Morin won 70 percent of votes, and Deborah Ellinger and James Johnston got 69 percent of votes at Sealy’s annual stockholders meeting on April 18, the company said in a regulatory filing (ZZ:US) today. ISS and Glass Lewis & Co., two shareholder advisory services, had recommended “no” votes for the three directors last month.

“Ellinger, Johnston and Morin served as members of the compensation committee during the past fiscal year, during which time the company failed to adequately link pay with performance,” Glass Lewis said in a March 19 report. “We are concerned that the compensation committee has not provided adequate rationale.”

Sealy came under criticism in a March 11 letter from H Partners Management LLC, a New York-based hedge fund that owns 15 percent of the company. H Partners accused KKR of overloading the Trinity, North Carolina-based bedding maker with debt and making strategic errors that reduced its earnings by half.

Sealy called the claims “combative” and unconstructive. In a March 23 letter, the company said KKR “has been a responsible partner” and said the board’s composition meets New York Stock Exchange guidelines for independence.

Gemma Hart, a spokeswoman for Sealy at Brunswick Group, didn’t immediately respond to a request for comment.

‘Disappointed and Perplexed’

FPR Partners, the San Francisco-based firm that owns about 8 percent of Sealy, said in a letter that it was “disappointed and perplexed” by the board’s response to H Partners.

The votes were enough for the three directors as well as the remainder of the nominees to be elected in the April 18 vote.

“These voting results represent a decisive vote of ‘no confidence’ for the incumbent Sealy directors,” H Partners said in a statement today. “H Partners will not cease in its efforts to reform the governance and oversight of Sealy, and will continue to pursue all avenues to protect its investment.”

KKR, run by Henry Kravis and George Roberts, acquired Sealy in 2004 for $1.5 billion from an investment group that included Bain Capital LLC. The buyout firm paid $5.78 a share for the mattress maker and took it public two years later for $16 a share.

The shares have since lost 87 percent of their value, falling 3.3 percent to $2.04 at the close of New York trading today. The company gained 19 percent this year after reporting that net income from continuing operations in the first quarter ended Feb. 26 rose to $1.6 million from $130,000 a year earlier.

To contact the reporter on this story: Devin Banerjee in New York at dbanerjee2@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net


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Companies Mentioned

  • KKR
    (KKR & Co LP)
    • $22.36 USD
    • 0.60
    • 2.68%
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