Masimo Offers Board Seat to Politan Amid Dispute

Key Takeaway

• Masimo offers a board seat to Politan's nominee to avoid a proxy fight, amidst tensions over governance and transparency.
• The dispute highlights concerns about Masimo's strategic decisions, including the spinoff of its consumer tech division.
• Despite initial stock price drop post-Sound United acquisition, the spinoff announcement rallied Masimo’s stock, signaling market approval.

Proxy Battle Developments

Health-technology firm Masimo is currently navigating through a challenging period marked by the threat of litigation and a second proxy contest initiated by Politan Capital’s Quentin Koffey. In an effort to mitigate these challenges, Masimo proposed a settlement to Koffey, offering to appoint one of his proposed directors, William Jellison, to a vacant board seat. This move, as stated by Masimo’s lead independent director Craig Reynolds, aims to "avoid the significant distraction and expense of a proxy contest." The backdrop of these developments includes Masimo's plans to spin off its consumer technology division, a strategy disclosed earlier by CEO Joe Kiani. However, tensions have escalated as Koffey accused Masimo of withholding critical information about the joint venture, including the potential partner's identity, necessitating nondisclosure agreements for board members to gain access to this information.

Governance and Transparency Concerns

The ongoing dispute between Masimo and activist director Quentin Koffey underscores deeper issues related to governance and transparency within the company. Koffey, who previously won a seat on Masimo’s board through a proxy fight, has been vocal about his concerns regarding the lack of oversight and access to fundamental information about the company’s strategic decisions. This includes details about the proposed spinoff of Masimo’s consumer business and the identity of the joint venture partner involved. Koffey’s demands for information and threats of legal action highlight the tension between the company’s management and its second-largest shareholder, Politan Capital, regarding the direction and governance of Masimo.

Strategic Decisions and Shareholder Impact

Masimo's strategic decision to spin off its consumer business follows the acquisition of Sound United in 2022 for $1 billion, a move that initially led to a significant drop in the company's stock price. Despite this, the announcement of the spinoff spurred a rally in Masimo’s stock, indicating a positive response from the market. The units proposed for the spinoff are expected to generate substantial revenue, with estimates ranging between $700 million and $780 million for the current year. Masimo CFO Micah Young has assured that the company's executives are diligently working on finalizing the deal structure and will present their findings to the full board in the coming months, reflecting an effort to realign the company’s focus and potentially unlock shareholder value.

Management Quotes

• Craig Reynolds, Lead Independent Director of Masimo:

  "He hoped adding Politan’s nominee William Jellison to the company’s board would help 'avoid the significant distraction and expense of a proxy contest.'"

• Joe Kiani, CEO of Masimo:

  "The company is trying to spin off its consumer technology division in concert with an unspecified joint-venture partner."