Calls on Long-Tenured Directors Stephen Gulis,
Michael Harrison, Shelly Ibach, Brenda Lauderback and Barbara Matas
to Respect the Will of Shareholders and Step Aside
Cites Support for Stadium Capital’s Recommended
Path Forward from Shareholders Representing More than 45% of Sleep
Number’s Outstanding Shares
Asserts that the Mere Prospect of Boardroom
Upgrades Has Caused Sleep Number’s Shares to Rise by More Than 63%
Since Stadium Capital’s November 25th Letter
Stadium Capital Management, LLC (together with certain of its
affiliates, “Stadium Capital” or “we”) is the largest shareholder
of Sleep Number Corporation (NASDAQ: SNBR) (“Sleep Number” or the
“Company”), owning approximately 11.7% of the Company’s outstanding
shares. Today, Stadium Capital issued the below letter to the
Company’s Board of Directors (the “Board”).
***
December 12, 2024
Members of the Board:
The legendary investor Benjamin Graham famously said, “In the
short run, the market is a voting machine but in the long run, it
is a weighing machine.” The voting machine has been unequivocal at
Sleep Number – shareholders resoundingly support the changes we
suggested in our public letter issued on November 25, 2024 (the
“November 25th Letter”). We are confident that with the prompt
implementation of our suggestions, the weighing machine will
reflect significantly more value creation at Sleep Number over
time. However, without the right changes, or with changes that take
too long to occur, we remain concerned that the Board will continue
to destroy shareholder value.
Since we published the November 25th Letter, we have received
feedback from shareholders representing more than 45% of the
outstanding shares (which equates to a majority of votes cast at
the Company’s recent annual meetings) in support of our recommended
path forward. We also understand that many of these shareholders
have expressed (or attempted to express) their views directly to
the Board as well. With Sleep Number’s
share price up over 63% since we published the November 25th
Letter, and no intervening news from the Company, it is
incumbent upon the members of the Board to stop burying their heads
in the sand and recognize that shareholders are clamoring for the
changes we are seeking.
Consider the Company’s staggering relative performance for
relevant periods before and after the issuance of the November 25th
Letter:1
1-Year
3-Year
5-Year
Ibach Tenure
Post Letter
Sleep Number Corp
23%
-85%
-74%
-52%
63%
Tempur Sealy International
40%
29%
172%
430%
1%
Out (Under) Performance
-17%
-113%
-246%
-482%
62%
In our view, the market reaction clearly indicates that the
long-tenured Company directors we identified for replacement in the
November 25th Letter (Stephen Gulis, Michael Harrison, Shelly
Ibach, Brenda Lauderback and Barbara Matas) lack credibility with
investors. These directors have destroyed hundreds of millions of
dollars of value during their tenures. In glaring contrast,
the prospect of meaningful change at Sleep
Number has now increased shareholder value by over 63%.
Let that sink in: the prospect of these directors’ departure from
the Board has increased the value of Sleep Number by more than $175
million. We cannot recall a more damning indictment by the market.
Shielding yourselves with shareholder-unfriendly governance
policies while, appallingly, spending investors’ money to defend
your positions in the face of the catastrophic harm endured by
Sleep Number’s owners and employees, not to mention overwhelming
shareholder opposition, is unacceptable and, frankly, embarrassing.
The Company’s performance under your leadership demonstrates that
you are failed fiduciaries, and it is time to step aside. The
owners whom you supposedly represent want change, now.
To be abundantly clear, we do not support the current CEO search
process, especially given the influence of the Company’s failed,
lame duck CEO. We firmly believe the process cannot continue under
current leadership. Instead, we have a specific plan of action,
with the right people to execute it, that we are prepared to
implement immediately to stabilize Sleep Number’s business. It is
inexplicable that the Board has not reached out to engage with us
following the issuance of the November 25th Letter or our
nomination of four exceptionally qualified director candidates on
December 2, 2024.
In our view, it is past time for you to put the interests of the
constituents you legally represent ahead of your own self-serving
interests. In the interests of Sleep Number’s shareholders,
employees and other key stakeholders, we implore you to step aside
and respect the will of shareholders.
Sincerely,
The Stadium Capital Investment Team
***
About Stadium Capital
Stadium Capital Management, LLC seeks to apply a patient,
private equity approach to public market investing, anchored by
deep fundamental research. Since our strategy inception in 1997, we
have invested in a concentrated portfolio of smaller-cap, public
companies across North America and Europe with a long-term
investment horizon and a focus on high-quality businesses with
durable free cash flow. We have almost three decades of deep
investment experience through multiple full market cycles, working
closely and collaboratively with our portfolio companies. For more
information, visit www.StadiumCapital.com.
CERTAIN INFORMATION CONCERNING THE
PARTICIPANTS
Stadium Capital Partners, L.P. (“SCP”), together with the other participants named
herein (collectively, “Stadium
Capital”), intend to file a preliminary proxy statement and
accompanying WHITE universal proxy card with the Securities
and Exchange Commission (“SEC”) to be
used to solicit votes for the election of Stadium Capital’s slate
of highly-qualified director nominees at the 2025 annual meeting of
shareholders of Sleep Number Corporation, a Minnesota corporation
(the “Company”).
STADIUM CAPITAL STRONGLY ADVISES ALL SHAREHOLDERS OF THE COMPANY
TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS, INCLUDING A
PROXY CARD, AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO
CHARGE ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION,
THE PARTICIPANTS IN THIS PROXY SOLICITATION WILL PROVIDE COPIES OF
THE PROXY STATEMENT WITHOUT CHARGE, WHEN AVAILABLE, UPON REQUEST.
REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS' PROXY
SOLICITOR.
The participants in the anticipated proxy solicitation are
expected to be SCP, Stadium Special Opportunity I, L.P.
(“SSO”), Stadium Capital Management
GP, L.P. (“SCMGP”), Stadium Capital
Management, LLC (“SCM”), Alexander M.
Seaver, Kevin Baker, Patrick A. Hopf, Jeffrey T. Jackson and
Jessica M. Prager.
As of the date hereof, SCP directly beneficially owns 2,215,000
shares of Common Stock, par value $0.01 per share (the
“Common Stock”), of the Company. As of
the date hereof, SSO directly beneficially owns 401,459 shares of
Common Stock. SCMGP, as the general partner of SCP and SSO, may be
deemed to beneficially own the 2,616,459 shares of Common Stock
owned in the aggregate by SCP and SSO. SCM, as the investment
advisor to SCP and SSO and as the general partner of SCMGP, may be
deemed to beneficially own the 2,616,459 shares of Common Stock
owned in the aggregate by SCP and SSO. Mr. Seaver, as the manager
of SCM, may be deemed to beneficially own the 2,616,459 shares of
Common Stock owned in the aggregate by SCP and SSO. As of the date
hereof, Mr. Hopf directly beneficially owns 51,500 shares of Common
Stock, which includes 1,500 shares of Common Stock underlying
certain call options that are currently exercisable. As of the date
hereof, Messrs. Baker and Jackson and Ms. Prager do not
beneficially own any shares of Common Stock.
***
1 The 1-, 3-, 5-year and Ibach tenure performance periods are
calculated as of market close on November 22, 2024, the immediately
preceding trading day to the November 25 Letter, which was issued
pre-market on November 25, 2024. The “Post Letter” period is
calculated from market close on November 22, 2024 to market close
on December 11, 2024, the trading day immediately preceding the
issuance of this letter. Source of share price data is Capital
IQ.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241212711503/en/
Longacre Square Partners Charlotte Kiaie / Bela Kirpalani,
646-386-0091 ckiaie@longacresquare.com /
bkirpalani@longacresquare.com
Sleep Number (NASDAQ:SNBR)
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