Slate Includes Sleep Number’s Former Chairman
and Interim CEO and Director Candidates with Significant
Shareholdings, Capital Allocation and Product Innovation Expertise
and Track Records Overseeing Value-Enhancing Turnarounds
Contends that its Director Candidates – Patrick
A. Hopf, Jeffrey T. Jackson, Jessica M. Prager and Kevin Baker –
Are Best Positioned to Identify Sleep Number’s Next CEO and Put the
Company Back on the Path to Growth and Profitability
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
shareholders regarding its nomination of four highly qualified,
independent candidates for election to the Company’s Board of
Directors (the “Board”) at the 2025 Annual Meeting of Shareholders
(the “Annual Meeting”).
***
December 2, 2024
Fellow Shareholders:
Stadium Capital is Sleep Number’s largest shareholder, holding
approximately 11.7% of the Company’s outstanding shares. Last week,
we expressed our grave concerns with Sleep Number’s financial
underperformance, corporate governance and flawed CEO search
process and made specific proposals to solve these pressing issues.
Based on the conversations we had with many of you both before and
after the publication of our letter, we are confident the majority
of you share our frustrations. That is why it was so surprising to
see the Board respond by vehemently defending its actions, instead
of pursuing the path of private collaboration with its largest
shareholder (as we have done with Sleep Number previously).
Today we are writing to inform you that we have nominated four
exceptionally qualified directors with capital allocation, product
innovation, business turnaround and unrivaled industry experience
for election to Sleep Number’s Board at the upcoming Annual
Meeting. We did not come to this decision lightly, as we strongly
prefer private engagement with the management teams and boards of
our portfolio companies on ideas for value creation and improved
governance. In this case, our hand has been forced because Sleep
Number’s Board is unwilling to work with its largest shareholder to
add new directors to the boardroom to ensure an independent CEO
search, and most concerningly, seems intent on continuing on its
current perilous path. This was made particularly evident by the
Board’s decision to reject our November 12th and November 25th
proposals (seemingly without entertaining them whatsoever) that
would have ensured a truly independent CEO search process.
Concerningly, the Board’s obstinance is occurring in the face of
investors embracing the prospect of change, with Sleep Number’s
shares appreciating 20% since we highlighted the path to enhanced
value in our letter last week.
Most troubling in the Board’s response, which failed to address
any of our concerns, was its characterization of our request as
“unusual” for direct participation in the CEO search – the most
consequential decision facing the Company over the next decade.
Under standard circumstances, we believe a willing and experienced
owner who holds more stock than the entire Board by many multiples
should have a seat at the table for such a momentous decision. In
these specific circumstances, where the long-tenured directors
directly involved in this critical decision have such abysmal track
records of value destruction, it is especially vital. A thoughtful
and open-minded Board should welcome the input of a diligent,
patient and large owner who brings a valuable and differentiated
perspective to this enormously consequential decision.
Unfortunately for this Board, the facts are starkly obvious:
Sleep Number’s long-tenured directors (Shelly Ibach, Stephen Gulis,
Brenda Lauderback, Michael Harrison and Barbara Matas, in
particular) have failed all of us as fiduciaries. They have not
only harmed but are now also insulting key constituents – the
shareholders they are supposed to represent and the employees who
are the heart and soul of the organization they govern – by wasting
our money to protect their lucrative roles as directors for as long
as possible. Their indefensible long-term record and recent
self-serving actions make it overwhelmingly clear that they cannot
be trusted with the important decisions that lie ahead.
To fix this broken situation, we have nominated four highly
qualified individuals who have the necessary expertise and
independence to address Sleep Number’s most pressing issues. Our
nominees are:
Patrick A. Hopf
Mr. Hopf is the former Interim CEO and Chairman of Sleep Number
and a successful private investor in consumer-oriented companies.
He will bring a positive track record of value creation as well as
strategic change and board development experience.
- Proven Value Creator with Deep Knowledge of Sleep
Number: At St. Paul Venture Capital – one of the ten largest
venture capital firms in the U.S. at its peak – Mr. Hopf led the
firm’s investment in Sleep Number (then called Select Comfort) in
1991 and later became the Company’s Interim CEO and Chairman. Mr.
Hopf oversaw multiple turnarounds at Sleep Number and during his
leadership, Sleep Number’s market value grew to over $1.4 billion.
He started the direct response sales channel at Sleep Number,
helped launch the retail channel and Roadshow channel, and was
instrumental in establishing the internet channel in the late
1990s.
- Experience in Board Development and CEO Searches: Mr.
Hopf has been on the boards of more than 30 private companies and
was the Chairman of many of them, including Sleep Number, where he
led three separate CEO searches for Sleep Number.
- Strong Alignment with Shareholders: Mr. Hopf has
steadfastly represented shareholder interests as a public market
investor, private investor, board member and operating manager for
over 40 years. Mr. Hopf also has a significant personal investment
in Sleep Number.
Jeffrey T. Jackson
Mr. Jackson is an experienced CEO and public company director
with an outstanding record of value creation and extensive
experience managing cyclical companies across market cycles, which
will be particularly relevant for Sleep Number.
- Proven Value Creator: After Mr. Jackson was named CEO of
PGT Innovations (“PGT”), the company’s shareholder returns
annualized in the high-teens and PGT more than doubled EBITDA
through organic growth and M&A activity.
- Extensive Experience Managing a Cyclical Business Across All
Phases of Growth: Prior to ascending to the CEO role, Mr.
Jackson also served as PGT’s CFO, where he helped guide the
business through the housing boom, bust and subsequent recovery,
including effectively managing its cost structure to successfully
position the company to capitalize on value-enhancing opportunities
when the market recovered.
- Experience Selling Products Through Multiple Distribution
Channels: Mr. Jackson drove accretive growth across PGT’s
portfolio of brands by selling its various products through
company-owned retail stores, third-party retailers and independent
dealers.
Jessica M. Prager
Ms. Prager has extensive experience building and scaling
high-performing, culturally relevant brands. Her expertise in
leveraging consumer data, driving product innovation and bridging
digital and physical touchpoints will be particularly relevant in
helping Sleep Number achieve its growth potential.
- Proven Value Creator: Ms. Prager is Senior Vice
President of Product at Roman Health Ventures (“Ro”), where she was
one of the company’s first 10 employees and has been instrumental
in scaling the company, which is now valued at $7 billion. She has
helped drive Ro’s significant growth and cement its position as a
leader in the consumer healthcare technology space.
- Expertise in Leveraging Consumer Data and Insights to Drive
Growth: Ms. Prager has a proven track record of using consumer
data at scale and analyzing consumer insights to refine customer
experiences and optimize growth marketing strategies. She has deep
experience in demand generation, direct-response marketing
strategies, brand building and optimizing ecommerce platforms from
her roles at Ro, ClassPass, Bain & Company and PepsiCo.
- Track Record of Marrying Brand Vision with Consumer
Experience: At ClassPass, Ms. Prager helped redefine how
consumers access fitness and wellness, connecting digital discovery
with physical participation. At Warby Parker, she supported the
launch of the company’s first permanent physical retail store,
creating an omnichannel model that set new industry standards.
Across Ro, ClassPass and Warby Parker, she has demonstrated an
ability to scale businesses while maintaining brand integrity and
cultural relevance.
Kevin Baker
Mr. Baker is a Managing Partner at Stadium Capital, Sleep
Number’s largest owner, and will bring a much-needed ownership
perspective to Sleep Number’s boardroom.
- Shareholder Perspective with a Clear Understanding of Sleep
Number’s Business: Exceptionally deep research and due
diligence is a centerpiece of Stadium Capital’s patient investment
strategy. As part of Stadium Capital’s investment team, Mr. Baker
has led extensive due diligence spanning a decade on Sleep Number
and the mattress industry. Mr. Baker will bring the largest
shareholder’s perspective to the boardroom and be laser-focused on
driving value for all shareholders.
- Capital Allocation and Financial Markets Expertise: Mr.
Baker has 14 years of experience as an investor in public
companies, with significant experience working directly with the
leadership teams of Stadium Capital’s portfolio companies on
value-enhancing capital allocation and capital structure
decisions.
Our nominees’ highly effective and complementary skillsets will
ensure that a refreshed, unbiased Board works constructively to
identify the biggest causes of Sleep Number’s underperformance,
uses those insights to identify the best CEO, and empowers and
incentivizes Sleep Number’s next CEO to reignite the Company’s
growth, profitability and market value. Most importantly, this
refreshed Board will put Sleep Number’s owners’ interests above its
own.
We continue to believe that it is in the best interest of all
shareholders for Sleep Number to collaborate with us by pursuing
the path we articulated in our November 25th letter: work with us
to refresh the Board, appoint an Executive Chairman and ensure a
wholly independent CEO search process to identify the Company’s
next leader. That is certainly the overwhelming message we have
heard from fellow shareholders, and to be clear, that is our
preferred outcome. However, if the Board continues down a
self-serving path and unnecessarily squanders resources to defend
those who are most responsible for the current calamity, then we
will look forward to letting the owners decide the future of our
Company at the Annual Meeting in spring 2025.
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241202287994/en/
Longacre Square Partners Charlotte Kiaie / Bela Kirpalani,
646-386-0091 ckiaie@longacresquare.com /
bkirpalani@longacresquare.com
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