Sealy shareholder H Partners wants answers about payments
Jay McIntosh -- Furniture Today, March 28, 2012
ARCHDALE, N.C. — In a new letter to Sealy's board, disgruntled shareholder H Partners Management is demanding that the company explain its payments to KKR, the mattress maker's largest shareholder.
H Partners also said it doubted a Sealy director's assertion that certain board members were "independent," saying, "A true independent director takes concrete actions which serve all shareholders, rather than acting as an extension of KKR."
The new letter, dated Tuesday and signed by Usman Nabi and Arik Ruchim, partners in H Partners, repeats the concerns the investors had raised in a March 11 letter and criticizes Sealy's response to that letter.
In the response, Sealy director Gary Morin, who is chairman of the board's nominating and governance committee, had rejected H Partners' demand for changes on the board. He said that five of its nine directors were classified as "independent" under New York Stock Exchange guidelines, and defended the company's relationship with KKR.
Morin said that KKR has been a "responsible partner" to Sealy since acquiring a majority stake in 2004. The investment firm helped take the company public in 2006, but retained a 46.2% share.
H Partners, Sealy's second largest shareholder with a 15.3% stake, says that Morin's letter "failed to explain why almost 90% or $1.3 billion of value has disappeared since Sealy's IPO in 2006. It also failed to address the governance deficiencies that we believe will lead to continued failure at Sealy."
Sealy's stock price has declined from $16 at its April 2006 initial public offering to about $1.99 at midmorning today. The stock was up nearly 6% in early trading today on an unexpectedly positive earnings report.
The new H Partners specifically questions why Sealy made "$9.7 million in payments to KKR for advisory services only two years after paying $11 million to terminate KKR's advisory services."
It also asks whether Sealy has made other undisclosed payments to KKR and its affiliates, and questions payments to independent directors in 2008 and 2009.
H Partners said that if Sealy did not answer its questions and implement the recommendations it made earlier, it would withhold support for Sealy's incumbent directors at the company's upcoming annual meeting, set for April 18. H Partners has not nominated its own slate of directors, however.
Sealy officials could not be reached for comment this morning. A Sealy spokesman told the Bloomberg news service earlier that the company declined to comment on the latest letter.