Sealy Corp.'s directors and controlling shareholder KKR & Co. were accused in an investors' lawsuit of shortchanging the mattress maker's stockholders by backing a $229 million buyout bid by rival Tempur-Pedic International Inc.
Tempur-Pedic, based in Lexington, Kentucky, agreed last month to pay $2.20 a share for Trinity, North Carolina-based Sealy to combine the two biggest publicly traded mattress companies. Investors allege Sealy and KKR executives didn't shop around for the best price for the maker of Sealy Posturepedic mattresses and structured the deal to discourage other bidders.
The deal “is not a value-maximizing transaction and is not the product of reasonable conduct by the Sealy board,” investors said in the Delaware Chancery Court suit. “KKR has breached its fiduciary duties as a controlling shareholder by pushing the proposed transaction to advance its own private interests.”
Analysts said Tempur-Pedic officials sought to acquire Sealy to gain access to new bedding markets through Sealy's international licensing deals and joint ventures.
“Tempur-Pedic gains access to new slots at major retailers and independents with a complimentary product suite,” Brian Sozzi, an analyst at NBG Productions, said in a note to clients.
Investors contend KKR, which owns about 46 percent of Sealy, controls the company through its representatives on the mattress maker's board. The private equity firm bought Sealy for about $1.6 billion in 2004 from rival Bain Capital Partners LLC.
Shahed Larson, a Sealy spokeswoman, said the mattress maker had no comment on the investor suit over the Tempur-Pedic buyout. Tempur-Pedic spokesman Mark Rupe didn't immediately return a call after business hours seeking comment.
Kristi Huller, a spokeswoman for New York-based KKR, declined to comment on the suit yesterday in an e-mailed statement.
Lawyers for Curtis Nall, a Sealy shareholder, contend KKR used its control of Sealy to push directors to sell the company to “cash out of its investment,” according to the complaint, filed today.
KKR has lined up support amounting to more than 50 percent of Sealy's shares for Tempur-Pedic's bid, meaning the deal won't be subject to a shareholder vote, Nall's lawyers added.
Sealy shareholders have long criticized KKR's dominance of the company, noting in a separate lawsuit earlier this year that Sealy has made handed over more than $20 million in payments and consulting fees to the private-equity firm since 2006.
Nall is asking a Delaware judge to bar Sealy from finalizing the sale to Tempur-Pedic and award damages to company shareholders.
It's unlikely that Sealy shareholders will see a bid come in to top Tempur-Pedic's, John Baugh, an analyst with Stifel, Nicolaus & Co., said in a note to clients yesterday.
The case is Curtis Nall v. Lawrence Rogers, 7957, Delaware Chancery Court (Wilmington).
Bloomberg News
Copyright 2018 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.
Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Thought leadership on regulatory changes, economic trends, corporate success stories, and tactical solutions for treasurers, CFOs, risk managers, controllers, and other finance professionals
- Informative weekly newsletter featuring news, analysis, real-world case studies, and other critical content
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the employee benefits and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
