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4-Traders Homepage  >  Equities  >  Nyse  >  KKR & Co. L.P.    KKR

KKR & CO. L.P. (KKR)
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Sealy comes out in support of KKR

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03/23/2012 | 05:22pm CEST

(Reuters) - Sealy Corp (>> Sealy Corporation) on Friday defended private equity firm KKR & Co LP (>> KKR & Co. L.P.), its largest shareholder, against a hedge fund's allegations of mismanagement and conflicts of interest that have led to the mattress maker losing 90 percent of its market value.

(Reuters) - Sealy Corp (>> Sealy Corporation) on Friday defended private equity firm KKR & Co LP (>> KKR & Co. L.P.), its largest shareholder, against a hedge fund's allegations of mismanagement and conflicts of interest that have led to the mattress maker losing 90 percent of its market value.

In a letter to Sealy earlier this month, H Partners Management LLC, which has a 14.5 percent stake in the company, took aim at KKR, not just over its management decisions but also over the conduct of Capstone, KKR's branded team of consultants.

On Friday, Sealy published a letter sent by Gary Morin, chairman of its nominating and governance committee, to H Partners to address the hedge fund's demands and rebut its claims.

"We continue to be open to constructive suggestions from shareholders that are in the long-term interest of the company," Morin wrote.

"However, we do not believe that your combative and public discourse is constructive as we seek the ideal candidate to lead our business and work to improve the company's performance for the benefit of all our shareholders."

Sealy, which was started by cotton gin builder Daniel Haynes in the late 19th century, was taken public by KKR two years after its acquisition from another private equity firm, Bain Capital LLC, for $1.5 billion, in 2004.

Since an initial public offering in 2006, Sealy shareholders have collectively seen equity value reduced by $1.3 billion, or about 90 percent.

Capstone has so far been eager to advertise its work on Sealy, featuring words of praise on KKR's website from Sealy Chief Executive Lawrence J. Rogers, who is set to retire this year once a successor for the troubled company is found.

H Partners accused KKR of taking a short-term investment approach to Sealy and not committing the necessary resources for the company to market innovative specialty products, resulting in the mattress maker forfeiting its market-leading position.

The company, which has debt of $790.3 million, has seen earnings drop by half between 2006 and 2011, hit by increased competition from the likes of Select Comfort Corp (>> Select Comfort Corp.) and Tempur-Pedic International Inc (>> Tempur-Pedic International Inc.), which have been more aggressive in meeting soaring demand for specialty mattresses.

"With KKR's support and an additional investment of $90 million in 2009, the company was able to weather one of the worst economic downturns in the last 100 years, while major competitors such as Simmons, Spring Air and IBC filed for bankruptcy protection," Morin wrote.

A lot of H Partners' criticism has been focused on Dean Nelson, KKR's consultant-in-chief and head of Capstone. The investment firm called for his resignation as a Sealy director, arguing that, as a provider of consulting services, he faces a conflict of interest.

"I would like to clarify that Dean Nelson defers all his fees as a Sealy director into Sealy common share units, which will not be paid out until he retires from the Sealy Board. This further aligns the interests of Mr. Nelson with all Sealy shareholders," Morin responded.

Sealy has conducted market research to ensure Capstone's fees are lower than those charged by firms that provide comparable services, Morin added.

H Partners had asked for a seat on Sealy's board and said it was willing to waive any board fees. It also asked for a representative on Sealy's nominating and corporate governance and CEO search committees.

"Our board has not changed since you invested in Sealy in the spring of 2011 and its composition is sound," Morin wrote.

H Partners has a track record of investment in distressed companies. Founded in 2005 by Rehan Jaffer, the hedge fund was one of the investors in theme park operator Six Flags Entertainment Corp (>> Six Flags Entertainment Corp) during its restructuring in 2010.

"Sealy's response fails to address the board's and KKR's significant role in the destruction of shareholder value at the company. We are carefully reviewing all of our options," H Partners said in an emailed statement reacting to the letter.

(Reporting by Greg Roumeliotis in New York; Editing by Tim Dobbyn and Gunna Dickson)

Stocks mentioned in the article
ChangeLast1st jan.
KKR & CO. L.P. 1.28% 21.42 Delayed Quote.1.71%
SELECT COMFORT CORP. -4.28% 32.4 End-of-day quote.43.24%
SIX FLAGS ENTERTAINMENT CORP -0.65% 61.32 Delayed Quote.-7.89%
TEMPUR SEALY INTERNATIONAL INC -0.35% 42.18 Delayed Quote.-32.72%
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Financials ($)
Sales 2018 3 398 M
EBIT 2018 2 031 M
Net income 2018 -
Debt 2018 -
Yield 2018 3,28%
P/E ratio 2018 -
P/E ratio 2019 7,39
Capi. / Sales 2018 5,24x
Capi. / Sales 2019 4,29x
Capitalization 17 805 M
Chart KKR & CO. L.P.
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KKR & Co. L.P. Technical Analysis Chart | KKR | US48248M1027 | 4-Traders
Technical analysis trends KKR & CO. L.P.
Short TermMid-TermLong Term
TrendsBearishNeutralNeutral
Income Statement Evolution
Consensus
Sell
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Mean consensus OUTPERFORM
Number of Analysts 14
Average target price 25,3 $
Spread / Average Target 18%
EPS Revisions
Managers
NameTitle
Henry R. Kravis Co-Chairman & Co-Chief Executive Officer
George Rosenberg Roberts Co-Chairman & Co-Chief Executive Officer
Joseph Yong Bum Bae Co-President, Co-COO & Director
Scott Charles Nuttall Co-President, Co-COO & Director
William Joseph Janetschek Chief Financial Officer
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