Select Comfort Shareholders Vote Down Sterling Deal

Posted by MCC on August 28th, 2009 at 07:00am

After a shareholders meeting on August 27, Select Comfort has announced that a deal to give the majority of ownership in the company to Sterling Partners was voted down. Only 49.94 percent of the shareholders voted in favor of the deal that would have turned control over to the equity firm.

Under the terms of the deal, Sterling Partners would have acquired 50 million shares for 70 cents per share totaling $35 million. If the deal had passed, Sterling would have had a majority of the seats on the board of directors with 52.5 percent ownership.

The company has been struggling for over a year and had warned shareholders that rejection of the deal would place the company out of compliance with the terms of its credit agreement. Rejecting the deal means that Select Comfort will have to reimburse Sterling Partners as much as $1 million for expenses and pay at least $750,000 in termination fees.

It isn’t clear what Select Comfort’s next move is going to be, but the company may have to file bankruptcy now. About 75 percent of Select Comfort’s revenues comes from company owned stores. This year the company has already closed over 50 stores.

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