Select Comfort shareholders reject sale

Vote falls barely short of majority

Larry Thomas -- Furniture Today, August 28, 2009

After a shareholders meeting Thursday, the company announced that 49.94% of its shares had been voted in favor of the transaction, just short of the majority that was needed.

Under terms of the proposed deal, Sterling would have acquired 50 million Select Comfort shares for $35 million, or 70 cents per share. That would have given the firm 52.5% ownership and a majority of the seats on the company's board of directors.

Select Comfort's next course of action wasn't immediately clear, but the company warned in a proxy statement sent to shareholders earlier this month that rejection of the deal would put the company out of compliance with the terms of its credit agreement. That, in turn, could cause the company to file for bankruptcy protection, the proxy statement said.

In any event, Select Comfort said it will have to reimburse Sterling up to $1 million for expenses related to the proposed deal, and pay a termination fee of at least $750,000.

The company has been struggling financially for more than a year, and its auditors placed a "going concern" qualification on its 2008 financial statements after same-store sales at company-owned retail stores plunged 25%.

Company-owned stores account for about 75% of Select Comfort's revenues.

In 2009, more than 50 stores have been closed, and the company reported a slight uptick in same-store sales in July.