Tempur Sealy International Inc. shareholders voted against re-electing three board members, including Chief Executive Officer Mark Sarvary, in a victory for activist investor H Partners Management.
Sarvary, Chairman Andrews McLane and Christopher Masto, who heads up the nominating and corporate governance committee, have agreed to quit the board “in accordance with Tempur Sealy’s bylaws,” the mattress maker said in a statement Friday. The remaining directors will decide whether to accept their resignations. In any case, Sarvary will remain CEO of the Lexington, Kentucky-based company.
H Partners, Tempur Sealy’s largest shareholder, had lobbied other investors to vote against the three directors, who were up for re-election at Friday’s annual meeting. The hedge fund also has called for Sarvary’s ouster as CEO, urging the company to recruit a “capable” leader, overhaul its management structure, and better communicate with workers, shareholders and retailers.
Tempur shares gained 3.2 percent to $62 in New York after the outcome was announced. The stock is up 13 percent this year.
H Partners, previously known for helping turn around theme-park operator Six Flags Entertainment Corp., owns about 10 percent of Tempur Sealy.
The activist has criticized Tempur Sealy for underperformance, poor corporate governance and execution failures since the company acquired spring-mattress producer Sealy Corp. in 2013. H Partners has argued that Sarvary can’t manage Sealy because it’s more operationally challenging than Tempur, which is known for its memory-foam beds.
H Partners ratcheted up its campaign after Sarvary last month, when it released a 95-slide presentation online critiquing management. Tempur Sealy has said that the hedge fund refuses to engage with the board.
Activist investors generally acquire equity stakes in publicly traded companies and agitate executives and directors to make changes they believe will boost shareholder returns.