Proxy Advisors Side With Activist Funds in Their Battles Against DuPont (DD) & Tempur Sealy (TPX)

ISS likewise supported H Partners Management in its proxy fight against mattress supplier Tempur Sealy International Inc (NYSE:TPX), in which it has a 10% stake consisting of more than 6.07 million shares. ISS last week urged shareholders to vote to remove the three directors targeted by H Partners, including both its CEO and chairman. ISS agreed with H Partners that CEO Mark Sarvary bears responsibility for the company’s disastrous plunge during the first half of 2012 when its stock shed 75% of its value over a two month period, from levels which it has failed to return to in the three years since.

Tempur Sealy International Inc (NYSE:TPX) likewise responded to ISS’s decision with disappointment, claiming the advisory firm is backing an activist investor which has no plan for value creation for the company going forward. However, ISS is not alone as proxy advisory firms Glass Lewis & Co. and Proxy Mosaic, LLC also expressed their support for H Partners, each also issuing reports that urge shareholders to vote for the removal of the three directors at Tempur Sealy’s 2015 Annual Meeting of Shareholders, which will take place on May 8.

H Partners had the largest position and the greatest exposure to Tempur Sealy among the funds in our database, followed by Robert Joseph Caruso’s Select Equity Group  with 5.77 million shares.

Following the moves of activist funds and their campaigns is important because it is a very specific and focused strategy in which the investor doesn’t have to wait for catalysts to realize gains in its holding. A fund like Trian can simply create its own catalysts by pushing for them through negotiations with the company’s management and directors. In recent years, the average returns of activists’ hedge funds has been much higher than the returns of an average hedge fund. Furthermore, we believe do-it-yourself investors have an advantage over hedge fund investors because they don’t have to pay approximately 2% of their assets and 20% of their gains every year to compensate these hedge fund managers. Soon, we’ll be releasing a new quarterly newsletter written by former activist hedge fund analyst Michael Bland that tracks 10 or so activist campaigns at any given time.

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