At a special meeting on Aug. 27, Select Comfort shareholders rejected a stock purchase agreement with Sterling Partners that would have given the investment group a majority stake in the Minneapolis–based mattress company.
The Sterling proposal fell just short of a majority, receiving 49.94% of the vote. The agreement was to include the issuance and sale to Sterling of 50 million shares of Select Comfort stock at $0.70 a share. The day before the meeting, Select Comfort stock closed at $2.77 a share.
Due to the vote’s very narrow margin, Select Comfort had Broadridge Financial Solutions, an independent certifier, conduct a recount. Broadridge verified the initial results of the vote. Subsequently, Sterling Partners filed a complaint in Delaware Chancery Court requesting expedited proceedings and a temporary restraining order requiring that Select Comfort retain an additional independent third party to recount the vote and that it be prohibited from terminating the securities purchase agreement until the recount was complete.
On Sept. 4, the court rejected Sterling Partners’ requests. On Sept. 3, Patrick Hopf, a former Select Comfort board chairman who holds 73,750 shares, filed a similar lawsuit in Hennepin County Minnesota District Court against the company. If the Sterling Partners agreement had been approved, Hopf was expected to be appointed president and chief executive officer of the company.
On Sept. 8, various financial news sources were reporting that hedge fund Adage Capital Partners GP had offered Select Comfort alternative financing.
