Sun Capital Wins Proxy Fight-- Next Up, a sale?

Activist Investor Sun Capital Securities Group LLC is reaping the reward of its support from proxy advisory services firm Institutional Shareholder Services. Next stop, sale?

The insurgent investor on Thursday reported successfully winning three seats on the board of Furniture Brands International Inc. According to a proxy solicitor, Sun Capital won its three seats, for Alan Schwartz, Ira Kaplan and T. Scott King, by “a substantial margin.”

Their successful proxy contest comes after ISS last month recommended to it institutional investor clients that they should support the three-person dissident slate.

With directors on board, the activists may also be one step closer to buying the business. In addition to its proxy contest, the activist fund had made an unsolicited bid for the furniture maker on Feb. 21.

Furniture Brands shunned Sun Capital’s advances, saying that the strategic plan it launched in the fall of 2007 is “on track, and earnings momentum is developing.” A key part of that plan is to switch to an operating company model designed to generate $40 million to $50 million in annual cost savings.

The St. Louis, Mo.-based furniture-making company also points out that should Sun Capital win its contest to put its nominees on its board, these directors would have a conflict of interest because they would be "less likely to fight for value" once another bid was put on the table.

Nevertheless, Sun Capital’s vice president, Jason Bernzweig, was, unsurprisingly, excited by the result:

“The election of Sun Capital’s nominees is a victory for all Furniture Brands shareholders. Today’s results demonstrate shareholders’ desire for constructive change at Furniture Brands, and we are gratified by their support for our nominees. Our nominees look forward to working with the other Furniture Brands Board members, management and the Company’s talented employees to enhance performance and create long-term value for the benefit of all shareholders,” he said, in a statement. -- Ron Orol