Sterling Partners To Purchase 52.5% of Select Comfort

Furniture World Magazine

Select Comfort Corporation. a leading bed retailer and creator of the SLEEP NUMBER® bed, announced it has entered into a securities purchase agreement with Sterling Partners, a leading growth-oriented, U.S.-based private equity firm. Under the terms of the agreement, Sterling Partners will purchase 50 million shares of common stock at $0.70 per share, for a total investment of $35 million. These shares will represent a 52.5 percent ownership interest in the company. The investment is subject to shareholder approval and customary closing conditions. The purchase agreement also contemplates the execution of an amended credit agreement with the company’s existing lenders. The amended credit agreement would provide maximum availability of $70 million, include new covenants and extend the maturity from June 2010 to December 2012. The combination of the equity infusion and the amended credit agreement would provide longer-term financial flexibility for the company. The amended credit agreement is subject to final lender approval and definitive documentation. “We’re pleased to have made important progress in our efforts to improve the company’s short- and long-term liquidity situation,” said Bill McLaughlin, president and CEO, Select Comfort Corporation. “Sterling Partners is a growth-oriented investor who recognizes the strength of our product, business model and people. The proposed transaction would allow us to collaborate with a partner who not only offers deep business knowledge and resources, but also shares our commitment to realizing the company’s long-term potential.” “Sterling Partners is extremely excited about our agreement with Select Comfort. As a Sleep Number bed owner and co-founder of Sterling Partners, I personally and professionally believe that Select Comfort products are simply the best available in today’s marketplace,” stated Chris Hoehn-Saric, co-founder and senior managing director, Sterling Partners. “During the past 12 months, the company’s leadership has made difficult and decisive moves, which have helped the company weather the current environment, while also positioning it for future success. As long-term investors and true partners to the company and existing shareholders, we look forward to working with Select Comfort to return the company to profitability and growth, and deliver enhanced value to its customers, employees and shareholders.” As part of the agreement, the company will reduce the size of its board of directors to nine members and appoint five persons designated by Sterling Partners. The company expects a shareholder vote on the proposed agreement to occur by late July or early August. The company also amended its existing credit agreement for the period through closing of this transaction. The amendment increases availability under the line to $75 million. The amended agreement also waives certain current and pending covenant requirements. These waivers are dependent on the company remaining on-track to secure shareholder approval. “The proposed investment by Sterling Partners meets the board’s objectives of improving the company’s financial flexibility, securing a longer-term credit agreement with our bank syndicate, and finding an investment partner who recognizes the long-term potential of Select Comfort,” explained Erv Shames, chairman, Select Comfort Corporation Board of Directors. “We’re pleased with the agreement because it represents a solid path forward for the company and its shareholders.” The company intends to file a current report on Form 8-K with the Securities and Exchange Commission (SEC), which will include a more-detailed description of these transactions and copies of the transaction documents. Piper Jaffray served as the exclusive placement agent and financial advisor in connection with the financing, and Duff & Phelps rendered a fairness opinion to the Select Comfort Board of Directors. About Sterling Partners: Sterling Partners is a private equity firm with a history of generating superior returns for its investors. With nearly $4 billion of capital under management, the firm invests in industries with positive, long-term trends and provides on-going support with a diverse and balanced team of industry veterans, operators, investors, strategy experts and human capital professionals. For more information, please visit www.sterlingpartners.com. About Select Comfort Corporation: Founded more than 20 years ago, Select Comfort Corporation is the nation’s leading bed retailer(1). Based in Minneapolis, the company designs, manufactures, markets and supports a line of adjustable-firmness mattresses featuring air-chamber technology, branded the Sleep Number® bed, as well as foundations and sleep accessories. SELECT COMFORT® products are sold through its approximately 440 company-owned stores located across the United States; select bedding retailers; direct marketing operations; and online at www.sleepnumber.com.