Sleep Number Enters into an Agreement with Largest Shareholder Stadium Capital

Rhea-AI Summary

Sleep Number (SNBR) has announced a significant board restructuring agreement with Stadium Capital Management, its largest shareholder. The agreement involves the retirement of five Board members, including previously announced departures of Michael J. Harrison and Shelly R. Ibach before the 2025 Annual Meeting.

Three additional directors will step down: Barbara R. Matas (by 2025 Annual Meeting), Brenda J. Lauderback (by December 31, 2025), and Stephen L. Gulis, Jr. (upon debt refinancing completion or 2026 Annual Meeting). Hilary A. Schneider has been appointed as Chair of the Management Development and Compensation Committee.

The agreement includes Stadium Capital's withdrawal of its director nominations and commitment to vote in favor of Sleep Number's nominees at the 2025 Annual Meeting. This restructuring aims to create a smaller, more agile Board focused on strengthening company performance and profitable growth.

Positive

• Board restructuring to create smaller, more agile leadership structure
• Resolution of potential proxy contest with largest shareholder
• Constructive agreement with Stadium Capital showing alignment on company's future direction

Negative

• Significant leadership turnover could create temporary instability
• Company acknowledges 'challenging market environment' requiring repositioning
• Pending debt refinancing indicates potential financial concerns

Insights

Financial Analyst

Sleep Number's agreement with Stadium Capital represents a significant governance restructuring that aims to create a more agile board structure. The agreement with their largest shareholder avoids what could have developed into a more contentious activist situation and provides a needed reset for the company's leadership approach.

The board refresh is substantial, with five directors stepping down through various timeframes. This represents a major governance shift that Stadium Capital clearly influenced, as evidenced by their withdrawal of previously submitted director nominations. The agreement signals a unified strategic approach moving forward between management and their largest investor.

What's particularly telling is the language used by Stadium Capital, noting "significant work to be done to reposition and strengthen Sleep Number" and acknowledging "difficult, but necessary steps." This indicates substantial business challenges beyond governance that need addressing. The incoming CEO Linda Findley and new Board Chair Phillip Eyler now have clear runway to implement strategic changes without immediate board conflicts.

This agreement likely prevents a potentially disruptive proxy contest while creating accountability to a significant shareholder. The coordinated transition suggests a thoughtful approach to governance changes rather than a reactive response to shareholder pressure. For a company with Sleep Number's relatively small market cap of $142 million, aligning with major shareholders while navigating a challenging market environment is a prudent governance move.

Corporate Governance Expert

This agreement represents a significant structural transformation of Sleep Number's governance framework. The retirement of five directors fundamentally reshapes board composition and will inevitably alter board dynamics and decision-making processes. This isn't merely routine director turnover - it's a calculated reconfiguration of governance architecture.

Stadium Capital's involvement as the largest shareholder suggests this was likely a negotiated settlement to avoid a potentially distracting and costly proxy contest. The language throughout the announcement carefully balances face-saving for departing directors while signaling substantial change ahead. The phased departure schedule for directors Lauderback and Gulis is particularly strategic - providing continuity through critical periods (debt refinancing) while still committing to their eventual departure.

The appointment of Schneider as Chair of the Management Development and Compensation Committee is also significant, as this committee will likely play a important role in establishing performance metrics and incentives for the new leadership team. This committee appointment, combined with the incoming CEO and Board Chair, creates a governance triumvirate that will shape Sleep Number's strategic direction.

Stadium Capital's commentary acknowledging "significant work" and "necessary steps" reveals their assessment of Sleep Number's position. The agreement represents a governance compromise that gives the new leadership team breathing room to implement changes while maintaining accountability to their largest shareholder. This balanced approach to board refreshment, with staggered departures rather than immediate wholesale changes, demonstrates governance discipline during a challenging transition period.

Significant changes enable a smaller, more agile Board structure

MINNEAPOLIS--(BUSINESS WIRE)-- Sleep Number Corporation (Nasdaq: SNBR) (“Sleep Number”) today announced that it has entered into an Agreement (the “Agreement”) with Stadium Capital Management, LLC (collectively with its affiliates, “Stadium Capital”), the company’s largest shareholder. As part of the Agreement, and combined with other recent announcements, five current members of the Sleep Number Board of Directors (the “Board”) will be retiring.

As previously announced, Michael J. Harrison and Shelly R. Ibach will not stand for reelection to the Board at the company’s 2025 Annual Meeting of Shareholders (the “2025 Annual Meeting”). Pursuant to the Agreement, and consistent with the stated intention of the Board to refresh its composition and reduce its size, three additional current directors will be retiring from the Board, including Barbara R. Matas who has agreed not to stand for reelection at the 2025 Annual Meeting. Additionally, Brenda J. Lauderback and Stephen L. Gulis, Jr. have agreed to accelerate their previously announced retirements. Lauderback will retire by December 31, 2025, and Gulis will retire effective as of the earlier to occur of (i) completion of the company’s debt refinancing, or (ii) the company’s 2026 Annual Meeting of Shareholders.

The Board has also appointed incumbent director Hilary A. Schneider as Chair of the Management Development and Compensation Committee. This will be effective following the 2025 Annual Meeting, in anticipation of Lauderback’s retirement.

“I appreciate the time Stadium Capital has spent with Linda Findley, our incoming President and Chief Executive Officer, and me,” said Phillip M. Eyler, incoming Chair of the Board. “We are pleased to have reached this agreement so that Linda and the Board can focus their full attention on strengthening Sleep Number’s performance during this challenging market environment and continuing to position the company for profitable growth. We are committed to maximizing value for our shareholders. We look forward to and welcome constructive input from Stadium Capital and other shareholders as we make important decisions for the future of Sleep Number.”

“On behalf of the Board, I would like to thank Barbara, Brenda and Steve for their many contributions and their years of dedicated service to the company,” continued Eyler. “We wish them the very best in their future endeavors.”

“We appreciate the Board working constructively with us to reach an agreement that facilitates our mutual goal of significant Board refreshment and renewal,” said Alexander M. Seaver, Co-Founder and Managing Partner of Stadium Capital. “Sleep Number’s Board and leadership team are taking difficult, but necessary, steps to position the company for success. Over the past few weeks, we have had the opportunity to get to know Linda and Phil through several extensive discussions about the business. There is significant work to be done to reposition and strengthen Sleep Number, and we believe this new leadership team is focused on the right priorities and can accelerate Sleep Number’s transformation. We look forward to working closely and collaboratively with Sleep Number’s new leadership team and refreshed Board.”

Pursuant to the Agreement, Stadium Capital has agreed to withdraw the director nominations it had previously submitted to the company and vote all of its shares in favor of Sleep Number’s nominees at the 2025 Annual Meeting. A copy of the Agreement will be included as an exhibit to the company’s current report on Form 8-K, which will be filed with the U.S. Securities and Exchange Commission (the “SEC”).

About Sleep Number Corporation

Sleep Number is a sleep wellness company. We are guided by our purpose to improve the health and wellbeing of society through higher quality sleep; to date, our innovations have improved nearly 16 million lives. Our sleep wellness platform helps solve sleep problems, whether it’s providing individualized temperature control for each sleeper through our Climate360® smart bed or applying our 32 billion hours of longitudinal sleep data and expertise to research with global institutions.

Our smart bed ecosystem drives best-in-class engagement through dynamic, adjustable, and effortless sleep with personalized digital sleep and health insights; our millions of Smart Sleepers are loyal brand advocates. And our 3,700 mission-driven team members passionately innovate to drive value creation through our vertically integrated business model, including our exclusive direct-to-consumer selling in nearly 650 stores and online.

To learn more about life-changing, individualized sleep, visit a Sleep Number® store near you, our newsroom and investor relations sites, or SleepNumber.com.

Forward-looking Statements

Statements used in this news release relating to future plans and events such as the statements about the company and Board’s leadership changes, its ability to advance its ongoing transformation, strengthen its performance, complete any debt refinancing, make important decisions, and position the company for profitable growth are forward-looking statements subject to certain risks and uncertainties which could cause the company’s results to differ materially. The most important risks and uncertainties are described in the company’s filings with the Securities and Exchange Commission, including in Item 1A of the company’s Annual Report on Form 10-K and other periodic reports. Forward-looking statements speak only as of the date they are made, and the company does not undertake any obligation to update any forward-looking statement.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250313065648/en/

Investor Contact: Dave Schwantes; investorrelations@sleepnumber.com

Media Contact: Julie Elepano; julie.elepano@sleepnumber.com

Source: Sleep Number Corporation

FAQ

How many board members are retiring from Sleep Number (SNBR) following the Stadium Capital agreement?

Five board members will retire, including Michael Harrison, Shelly Ibach, Barbara Matas, Brenda Lauderback, and Stephen Gulis.

When will Brenda Lauderback retire from Sleep Number's board?

Brenda Lauderback will retire by December 31, 2025.

What are the terms of Stadium Capital's agreement with Sleep Number (SNBR)?

Stadium Capital agreed to withdraw its director nominations and vote in favor of Sleep Number's nominees at the 2025 Annual Meeting.

Who will chair Sleep Number's Management Development and Compensation Committee?

Hilary A. Schneider will become chair following the 2025 Annual Meeting.