In another coup for activist investors, mattress maker Tempur Sealy International announced Monday that CEO Mark Sarvary will step down as part of an overhaul of its management and board.
Sarvary and other Tempur Sealy executives had been the target of activist hedge fund H Partners Management, which has argued that the company has underperformed both its competition and the broader stock markets.
At the annual meeting on Friday, shareholders voted against the re-election to the board of Sarvary, Chairman P. Andrews McLane, and the chairman of the board’s corporate governance committee, Christopher A. Masto.
As part of the changes announced Monday, Sarvary, McLan, and Masto are all stepping down. Tim Yaggi, currently Tempur Sealy’s operating chief, will take over as CEO on an interim basis, while H Partners’ Usman Nabi will join the board.
“I look forward to collaborating with the board and management team to help the company achieve its full potential,” Nabi said in a news release.
As Bloomberg reports, H Partners, Tempur Sealy’s largest shareholder, had called for Sarvary’s ouster as CEO, urging the Lexington, Ky.-based company to recruit a “capable” leader, overhaul its management structure, and better communicate with workers, shareholders, and retailers. The hedge fund was previously known for helping turn around theme-park operator Six Flags Entertainment.
The New York Times called Friday’s shareholder vote “stunning,” saying it “illustrates the continued prominence and success of activist investors who demand shake-ups of what they say are underperforming companies.”
In response to H Partners’ campaign, Tempur Sealy had argued that the hedge fund had no experience in the mattress industry and no alternative plan.
“Tempur Sealy needs — and has — steady and experienced leadership at the helm to navigate this critical time in the execution of the company’s strategy,” the company said in a recent letter to investors.
The new management will face a challenge. According to Forbes, Tempur Sealy’s profit margins “are in a chronic state of contraction, and it appears that low-to-mid single digit sales growth is coming at the expense of profitability.”
Tempur Sealy’s stock was down about 3.4% in trading Monday.