The battle for control of Masimo will come to a head today, when shareholders decide whether to back Chairman and CEO Joe Kiani or elect activist investor Politan Capital Management’s candidates to the board at the company’s annual meeting.
The faceoff between Kiani, who founded the pulse oximetry company 35 years ago, and Politan managing partner Quentin Koffey has been two years in the making. As both sides stepped up their public attacks on the other recently with accusations of false and misleading statements, a federal judge last week found Politan and Koffey in contempt of court for disclosing information that was sealed in legal proceedings tied to the proxy contest.
Judge James Selna of the U.S. District Court for the Central District of California ruled that Politan gained an unfair advantage when it disclosed in a press release, without the court’s permission, that Masimo was denied a preliminary injunction. Masimo had sought to prevent Politan from soliciting votes with false statements. However, in denying the injunction, Selna found that Politan provided corrected information.
Koffey was elected to Masimo’s board in June 2023 along with Politan-backed candidate Michelle Brennan, a former Johnson & Johnson executive. The hedge fund argued that Masimo’s $1 billion acquisition of consumer audio company Sound United and a subsequent selloff in Masimo’s shares were the result of poor management oversight.
Kiani is now up for reelection, while Politan aims to gain two additional board seats as it continues to accuse the company of failed governance. Politan has proposed Darlene Solomon, Agilent Technologies’ former chief technology officer, and William Jellison, Stryker’s former CFO, for board seats.
Masimo has nominated Christopher Chavez, the former CEO of medtech companies Trivascular and Advanced Neuromodulation Systems, to fill the second board seat. In a statement Sunday, Masimo emphasized changes are underway at the company that include separating its consumer business and expanding the board. Kiani, the holder of 900 patents, is the “driving force” behind Masimo’s innovation, the company said. “Our interests are aligned with our stockholders’, and we will not let you down,” Kiani told shareholders in the release.
Proxy advisory firms have lined up on both sides of the contest. ISS and Glass Lewis recommended shareholders vote in favor of Politan’s nominees.
Meanwhile, Egan-Jones Proxy Services, in a report published last week, voiced support for Kiani and Chavez. A Politan win could destabilize Masimo and hinder its growth, Egan-Jones warned in the report, which it provided to MedTech Dive.
“It has become evident that shareholders must now choose between the existing CEO and his experienced technology building team or the dissidents who will likely have to bring in a new CEO and team,” the report stated.
The firm called the potential resignations of Chief Operating Officer Bilal Muhsin and key engineers detrimental to Masimo’s future and shareholder interests, as well as to the customers who rely on its products. Muhsin notified the board in June that he intended to resign if Kiani were removed from his posts. Nearly 300 Masimo engineers signed a letter in support of the CEO and said they may also leave the company.
“If Politan wins this proxy fight, we believe that Masimo would be effectively taken over, without paying a control premium to the shareholders, and instead would disrupt the trajectory of operational and financial milestones,” Egan-Jones wrote, adding, “The current management team is well-positioned to continue leveraging Masimo's patents and product pipeline.”
On the other side, Glass Lewis has reiterated its support for Politan’s candidates, according to a Tuesday statement from Politan. Glass Lewis remains concerned about the effectiveness of Masimo’s oversight structure and maintains that investors should be skeptical of the current board's ability to independently review strategic alternatives including the consumer business separation, the statement said.
“We also continue to believe Politan's nominees — both of whom we consider credible and independent — represent a sound substitute here, and would go a long way to ensuring the interests of all investors are clearly and consistently represented at a particularly critical juncture for the Company,” Politan quoted Glass Lewis as saying.
Masimo said advanced talks with potential joint venture partners for the consumer business are continuing. The company intends to sell a majority stake of that business, which includes Masimo's consumer health and audio products, to a joint venture. Potential partners in the venture include a large U.S.-based technology company, Masimo said.
In January, Masimo scored a victory in an intellectual property dispute against Apple when a U.S. International Trade Commission ban on sales of Apple Watches with pulse oximetry went into effect, forcing the tech giant to sell the devices without the oxygen saturation measurement feature. Apple is appealing the case.
