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H Partners installs a turnaround executive as CEO in Tempur Sealy International

by | Apr 4, 2016

  • BASICS
  • Market capitalization: $4.4 billion
  • Tempur Sealy International, Inc. develops, manufactures and markets mattresses, foundations, pillows and other products.
  • On September 4, 2015, Tempur Sealy International, Inc. appointed Scott L. Thompson as CEO and President of the company effective September 8, 2015.
  • SIGNIFICANT SITUATION AT THE TIME OF APPOINTMENT

Exit of CEO due to the proxy battle by H Partners Management, LLC

  • In February 2015, H Partners (holds 9.9%) stated that it had lost confidence in CEO Mark Sarvary and described Mr. Sarvary’s numerous execution errors and record of value destruction.
  • H Partners demanded that the Board fire Mr. Sarvary.
  • In March 2015, H Partners filed a preliminary proxy statement urging the company’s shareholders to vote against the company’s three (out of eleven) Directors at the 2015 AGM.
  • On May 08, 2015, the company’s shareholders voted against the above said three Directors and subsequently the three Directors resigned.
  • On May 11, 2015, Mr. Sarvary resigned as CEO of the company and H Partners entered into an agreement with the company. As per the agreement, W. Timothy Yaggi (company’s COO) would serve as interim CEO and the company would appoint two individuals recommended by H Partners to the Board.
  • The company also agreed to appoint a permanent CEO who would be accepted by H Partners’ nominees.

Chieftain Capital Management, Inc.’s active presence

On February 19, 2015, Chieftain Capital Management, Inc. (5.8%) sent a letter to the Board indicating its support for H Partners’ proposals regarding the leadership and future of the company. It supported an immediate change of CEO and the Board

  • TRACK RECORD OF NEW CEO

Stellar performance during tenure with Dollar Thrifty Automotive Group, Inc.

  • He served as CEO of Dollar Thrifty Automotive Group, Inc. from 2008 to 2012.
  • Sale of company: In 2012, he sold the company to Hertz Global Holdings, Inc. for $2.3 billion.
  • Turnaround: The company’s share price increased from a few cents in October 2008 to $87.4 per share in 2012. In 2011, Dollar Thrifty reported the best year in the company’s history, with $303.2 million in Corporate Adjusted EBITDA, compared to a $2.3 million loss in 2008. In 2011, the company generated best high net income in its history, with $159.5 million.

 

Co-founded Group 1 Automotive, Inc.

  • Group 1 Automotive, Inc. is an operator in the automotive retail industry. Mr. Thompson co-founded Group 1 Automotive and served as CFO and Treasurer from 1996 to 2004.
  • During his tenure, the company completed its IPO and the company’s share price increased two times, from $12 per share (IPO price) in November 1997 to $36 per share in March 2004.

Jana Partners’ comment about Mr. Thompson

Jana Partners, an activist fund, made the following remark about Mr. Thompson when they suggested Mr. Thompson for the CEO’s job at Hertz Global Holdings, Inc.

  • Thompson has repeatedly demonstrated his ability in managing fleet costs. As CEO of Dollar Thrifty and a founder and CFO of Group 1 Automotive, he had extensive experience negotiating both retail and wholesale automotive purchases from all the major worldwide OEMs.
  • Thompson took Dollar Thrifty’s annual fleet costs from the highest among its publicly-traded peers to the lowest, despite Dollar Thrifty being the smallest company in this group.
  • Few executives in any industry have generated as much shareholder value creation as CEO as Mr. Thompson did at Dollar Thrifty, where he generated an annualized return of approximately 200%.
  • To read more, click the below link:

http://www.sec.gov/Archives/edgar/data/1159159/000090266414004233/p14-2158exhb.htm

CONCERN

Irrelevant experience: Tempur Sealy International is a mattress company, whereas Mr. Thompson has more than 10 years experience in the auto industry. Mr. Thompson lacks operational experience in the mattress industry.

  • BIO OF NEW CEO

Scott Thompson, age 56, previously served as Chief Executive Officer and President of Dollar Thrifty Automotive Group, Inc. until it was purchased by Hertz Global Holdings, Inc. in 2012. Prior to serving as CEO and President, Mr. Thompson was Senior Executive Vice President and Chief Financial Officer of Dollar Thrifty. Prior to joining Dollar Thrifty in 2008, Mr. Thompson was a consultant to private equity firms, and was a founder of Group 1 Automotive, Inc., a NYSE and Fortune 500 company, serving as its Senior Executive Vice President, Chief Financial Officer and Treasurer. Mr. Thompson presently serves as a member of the Board of Directors for Asbury Automotive Group, Inc., Houston Wire and Cable Co. and Conn’s, Inc. Mr. Thompson earned a Bachelor of Business Administration degree from Stephen F. Austin State University in Nacogdoches, Texas, and began his career with a national accounting firm.

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