Dive Brief:
- Masimo said it plans to separate its consumer audio and consumer health products businesses, nearly two years after it acquired Sound United for $1 billion.
- The company said it expects the Stork baby monitor and Freedom smartwatch will be included in the separation, while Masimo will retain its professional healthcare and telehealth products.
- The split off of the consumer business is expected to improve the profitability of the healthcare business, Masimo said.
Dive Insight:
The acquisition of Sound United and its consumer audio brands in April 2022 was an unusual step for a medical device company. Known for its pulse oximetry technology that measures blood oxygen levels noninvasively, Masimo gained multiple consumer brands when it bought Sound United, including Bowers & Wilkins, Denon, Marantz and Boston Acoustics.
When it announced the deal, Masimo founder and longtime CEO Joe Kiani heralded the strategy as an opportunity to leverage Sound United’s expertise to accelerate distribution of Masimo’s expanding portfolio of consumer products.
However, Masimo struggled with declining revenues in 2023, and a proxy battle spurred by the Sound United acquisition resulted in the election of two board members backed by activist investor Politan Capital.
Kiani is expected to remain chairman and CEO of Masimo and to be named chairman of the newly created company, according to Friday’s statement.
Kiani said he proposed the separation of the consumer business in January, and the board has now agreed to move forward with the plan. The timing of the transaction, and what shape it will take, is not known, but Masimo said it wants to complete the move as soon as possible. The company also reaffirmed its 2024 financial guidance.
“This approach is expected to maximize shareholder value as well as give both Masimo healthcare and the new consumer business the best path for success,” Kiani said.
Stifel analyst Rick Wise said the separation announcement should be viewed positively. “A separation of the two businesses, over time, would seem to be positive for Masimo's fundamentals, intensified operational focus, and ultimately, Masimo's share price,” the analyst wrote in a note to clients.
