The Urethane Blog

Tempur Sealy Fending Off Activist Investor


  Tempur Sealy Logo



LEXINGTON, Ky., March 16, 2015 /PRNewswire/ – Tempur Sealy International, Inc. (NYSE: TPX), the world's largest bedding provider, announced today that it has filed definitive proxy materials with the Securities and Exchange Commission ("SEC (SCUR)") in connection with its upcoming 2015 Annual Meeting of Shareholders to be held on May 8, 2015. Tempur Sealy (TPX) shareholders of record as of March 11, 2015 are eligible to vote at the 2015 Annual Meeting.

The Tempur Sealy Board of Directors unanimously recommends that shareholders vote FOR the Company's experienced and highly qualified directors: Evelyn S. Dilsaver, Frank Doyle, John A. Heil, Peter K. Hoffman, Sir Paul Judge, Nancy F. Koehn, Christopher A. Masto, P. Andrews McLane, Lawrence J. Rogers, Mark Sarvary and Robert B. Trussell, Jr.

In connection with the proxy statement, the Company is mailing a letter to shareholders detailing the significant progress and accomplishments achieved under the leadership of the Tempur Sealy Board and management team. In the letter, the Company also reiterates its strategy to continue delivering industry leading growth, margin improvement, and superior value for shareholders, including: leveraging and strengthening our comprehensive portfolio of iconic brands and products; expanding distribution and seeking highest dealer advocacy; expanding margins with a focus on driving significant cost improvement; leveraging global scale for competitive advantage; and making accretive acquisitions of licensees and joint ventures. Highlights of the letter include:


Pursuing a Clear Strategy to Deliver Shareholder Value


Tempur Sealy has taken decisive action to adapt to an evolving competitive landscape and position the Company for long-term growth and success. In addition to the acquisition of Sealy Corporation, Tempur Sealy reinvented its entire range of mattress and adjustable base product offerings, improved economics for its retail partners to increase advocacy for its products and strengthened its marketing campaigns. As a result of these steps, Tempur Sealy has the foundation in place to continue successfully executing on its strategic priorities to generate growth and enhanced shareholder value creation.


Recognizing the Sealy Opportunity


In 2012, Tempur-Pedic's Board and management team, led by Chief Executive Officer Mark Sarvary, recognized in Sealy an attractive opportunity for Tempur-Pedic and its shareholders. The transformative acquisition of Sealy not only created the world's largest bedding provider, but also contributed to an over 100% stock price appreciation in Tempur Sealy since the announcement of the transaction, creating an additional approximately $1.8 billion in equity value for shareholders1.


Track Record of Accomplishing Strategic Goals


The Tempur Sealy Board and management team have delivered on several key
objectives that help position the Company for long-term growth by:

  • Driving value through the successful, nearly completed Sealy integration;
  • Returning Tempur North America to strength and profitability;
  • Positioning Tempur International for enhanced growth by increasing distribution, brand awareness and product offerings; and
  • Generating substantial cash flow, reducing debt and enhancing flexibility to enable future return of capital to shareholders.


Poised to Deliver Long-Term Sales and Earnings Growth


With Tempur Sealy's strengthened foundation in place, the Company is confident that the continued execution against its strategic priorities will result in strong growth between 2015 and 2018, including2:

  • 6% net sales growth;
  • 50 basis points of operating margin improvement; and
  • 15% growth in adjusted earnings per share (EPS), including achieving an adjusted earnings per share (EPS) target of $4.00 in 20163.


Intensely Focused on Enhancing Margins


Enhancing margins and driving profitability remain an important priority at Tempur Sealy. The Company expects to generate approximately $125 million in operating income improvement by 20184 by:

  • Improving Sealy's U.S. gross margins;
  • Achieving additional cost synergies from the Sealy acquisition;
  • Reducing operating expense; and
  • Implementing enhanced 2015 pricing strategy.


Board and Management Team Delivering Solid Results and Driving Shareholder Returns


Under the Board's oversight and since Mr. Sarvary's appointment in 2008, Tempur Sealy has:

  • Realized a total shareholder return of more than 480%, more than five times that of the S&P 5005;
  • Increased total net sales by more than 220%, including the acquisition of Sealy;
  • Grown adjusted EPS by more than 180%6; and
  • Increased its share price 8% in the last year, 30% in the last two years and more than 86% over the last five years7.



Addressing H Partners
In addition, the letter sets the record straight regarding H Partners, a shareholder of the Company, and its campaign of false statements and misrepresentative attacks on Tempur Sealy, its Board and management team. As the letter notes, Tempur Sealy believes that H Partners has failed to outline any constructive steps to enhance the Company's strategy, capital structure or operating plans, and instead advocates high-risk and value-destroying leadership changes, while making inaccurate statements about its history of communicating with Tempur Sealy. The letter also noted that H Partners' sudden, critical public stance is inconsistent with its previous positive communications in support of the Company's performance, leadership and strategic oversight.

The full text of the letter is below: