Sleep Number investor Stadium Capital pushes for board shakeup-letter

Sleep Number

13/09/2023 12:00

By Svea Herbst-Bayliss
       NEW YORK, Sept 13 (Reuters) - Investment firm Stadium
Capital Management wants to shake up the board of bed and
mattress maker Sleep Number Corp  SNBR.O  following more than a
decade of poor returns, according to a letter reviewed by
Reuters.
    Stadium Capital, which owns roughly 9% of the Minneapolis,
Minnesota-headquartered company, said Sleep Number is
undervalued and is not performing to its potential. In the last
52 weeks, the stock price has dropped 42%. It closed at $25.96
on Tuesday after having topped $140 a share during the COVID-19
pandemic as mattress sales surged. 
    Pointing to "deficiencies in the boardroom", the investment
firm wrote: "We urge you to collaborate with us on a Board
refresh that includes a Stadium Capital representative and other
new directors with relevant expertise."
    The board "failed to oversee accretive capital allocation,
effective forecasting and a culture of strong accountability for
management," the letter said. 
    Stadium, based in New Canaan, Connecticut, criticized the
board’s decision to authorize more than $630 million in share
repurchases at an average price of approximately $90 per share
between 2020 and 2022. 
    The firm also argued the board erred by mistaking a
pandemic-driven increase in sales as heightened demand for
wellness technology.
    A Sleep Number representative was not immediately available
for comment.
    Stadium Capital had previously asked Sleep Number to add
three new directors, including one of the firm's principals,
without success. 
    The standoff sets the stage for a potential proxy fight,
with the company's window for nominating director candidates
just two months away.
    "The Board, as presently constituted, includes long-tenured
members who have been part of questionable decisions and would
likely not fare well in a contested election next year," the
letter said.
    Rival mattress companies including Tempur-Sealy  TPX.N  and
Purple Innovation  PRPL.O  have been the targets of successful
activist campaigns.  

 (Reporting by Svea Herbst-Bayliss; Editing by Lincoln Feast.)
 ((svea.herbst@thomsonreuters.com; +617 233 2138; Reuters
Messaging: svea.herbst.thomsonreuters.com@reuters.net))