Dive Brief:
- Masimo shareholders elected Politan Capital Management’s two candidates to the board in a defeat for CEO Joe Kiani, the investment firm said Thursday, based on a preliminary analysis of votes by its proxy solicitor.
- Kiani, the founder and chairman of the pulse oximetry company who ran for reelection, lost his board seat at the annual shareholder meeting. Management-backed candidate Christopher Chavez also failed to win a seat.
- Masimo did not release a statement on the vote by the time of publication. The results follow a contentious board battle that spilled into the courtroom as both sides sought to portray the other as a threat to shareholder value and hurled allegations of misstatements.
Dive Insight:
The proxy victory for Politan means the activist investor, with a 9% stake in the company, now controls four of six seats on Masimo’s board of directors.
Politan nominees Darlene Solomon and William Jellison will join Politan managing partner Quentin Koffey and former Johnson & Johnson executive Michelle Brennan on the Masimo board. Jellison is a former CFO of Stryker, and Solomon served as chief technology officer of Agilent Technologies.
Koffey and Brennan won their seats after a proxy fight last year.
In a joint statement, Solomon, Jellison, Brennan and Koffey said, “We are united in our enthusiasm for Masimo’s future as a leading, innovation-focused growth company.” The four said they looked forward to meeting and working with the company’s healthcare and consumer employees.
“We would also like customers to know that we will be completely focused on preventing any disruption to their service and support. We will have more to share soon,” they said.
Politan’s win points to the likely departure of Kiani, an electrical engineer who started the company 35 years ago and holds more than 900 of its patents. The hedge fund accused management of “broken” corporate governance under an entrenched leader and criticized the $1 billion acquisition of consumer audio products company Sound United in 2022 as the reason for Masimo’s stock underperformance.
Masimo saw Sound United's consumer expertise as a way to expand beyond traditional healthcare channels but ultimately decided to pursue a separation of the consumer business, a move that Politan has said it supports if “done right.”
Masimo said this week that advanced discussions with potential joint venture partners for the consumer business were continuing. The business includes Masimo's consumer health and audio products.
“We believe this shareholder vote outcome clarifies a major uncertainty about [Masimo’s] board composition, and lays the groundwork for determining the long-term leadership direction at Masimo,” Stifel analyst Rick Wise said in a note to clients. “That said, the exact timing and way in which the newly configured board proceeds from here remains to be clarified.”
Needham analysts wrote in a Friday investor note that assuming Kiani and Chief Operating Officer Bilal Muhsin now resign, they “expect Politan to appoint an interim CEO (likely one of the board members) and to begin an immediate search for a new CEO and any other C-suite executives that resign.”
Muhsin threatened in June to step down if Kiani were removed, and nearly 300 Masimo engineers said they may leave the company if the CEO is replaced. However, the Needham analysts were skeptical that all of the engineers would depart.
