Sealy Corp.'s directors and controlling shareholder KKR &Co. were accused in an investors' lawsuit of shortchanging themattress maker's stockholders by backing a $229 million buyout bidby rival Tempur-Pedic International Inc.

Tempur-Pedic, based in Lexington, Kentucky, agreed last month topay $2.20 a share for Trinity, North Carolina-based Sealy tocombine the two biggest publicly traded mattress companies.Investors allege Sealy and KKR executives didn't shop around forthe best price for the maker of Sealy Posturepedic mattresses andstructured the deal to discourage other bidders.

The deal “is not a value-maximizing transaction and is not theproduct of reasonable conduct by the Sealy board,” investors saidin the Delaware Chancery Court suit. “KKR has breached itsfiduciary duties as a controlling shareholder by pushing theproposed transaction to advance its own private interests.”

Analysts said Tempur-Pedic officials sought to acquire Sealy togain access to new bedding markets through Sealy's internationallicensing deals and joint ventures.

“Tempur-Pedic gains access to new slots at major retailers andindependents with a complimentary product suite,” Brian Sozzi, ananalyst at NBG Productions, said in a note to clients.

Investors contend KKR, which owns about 46 percent of Sealy,controls the company through its representatives on the mattressmaker's board. The private equity firm bought Sealy for about $1.6billion in 2004 from rival Bain Capital Partners LLC.

Shahed Larson, a Sealy spokeswoman, said the mattress maker hadno comment on the investor suit over the Tempur-Pedic buyout.Tempur-Pedic spokesman Mark Rupe didn't immediately return a callafter business hours seeking comment.

Kristi Huller, a spokeswoman for New York-based KKR, declined tocomment on the suit yesterday in an e-mailed statement.

Lawyers for Curtis Nall, a Sealy shareholder, contend KKR usedits control of Sealy to push directors to sell the company to “cashout of its investment,” according to the complaint, filedtoday.

KKR has lined up support amounting to more than 50 percent ofSealy's shares for Tempur-Pedic's bid, meaning the deal won't besubject to a shareholder vote, Nall's lawyers added.

Sealy shareholders have long criticized KKR's dominance of thecompany, noting in a separate lawsuit earlier this year that Sealyhas made handed over more than $20 million in payments andconsulting fees to the private-equity firm since 2006.

Nall is asking a Delaware judge to bar Sealy from finalizing thesale to Tempur-Pedic and award damages to company shareholders.

It's unlikely that Sealy shareholders will see a bid come in totop Tempur-Pedic's, John Baugh, an analyst with Stifel, Nicolaus& Co., said in a note to clients yesterday.

The case is Curtis Nall v. Lawrence Rogers, 7957, DelawareChancery Court (Wilmington).

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