After several weeks of back-and-forth, the proxy battle activist investor Politan Capital Management waged against Masimo has drawn to a close.
Politan emerged from the war triumphant: At Masimo’s annual meeting on Monday, shareholders voted in favor of the two nominees the investment firm had put forth to join Masimo’s board of directors, Politan announced.
Quentin Koffey, managing partner and chief investment officer at Politan, and Michelle Brennan, a former executive at Johnson & Johnson, were each elected with at least 70% of the vote—not including votes from company insiders—according to Politan.
“Michelle and I would like to thank our fellow shareholders for their support and engagement throughout this campaign, and we look forward to continuing this dialogue as directors. We believe this election represents a clear mandate from shareholders that significant change is needed at Masimo,” Koffey said in the announcement.
“We are now fully focused on putting the election behind us and working constructively with the incumbent directors to improve the company’s corporate governance, enhance capital allocation and instill better strategic oversight,” he continued. “We look forward to helping Masimo reach its full potential for all its stakeholders.”
The vote pitted Koffey and Brennan against current board members H Michael Cohen and Julie Shimer, Ph.D., who will now be replaced on the five-person board.
In a statement sent to Fierce Medtech, Masimo said, “We are disappointed to have lost the valuable contributions of two very qualified and capable board members. We are committed to continuing to innovate revolutionary products for patients and consumers worldwide.”
Earlier this month, while maintaining that Cohen and Shimer should be reelected to the board, Masimo said its board of directors was willing to appoint Brennan to the board if shareholders voted to expand its size from five to seven members and as long as Koffey wasn’t also elected in the vote.
“Unlike Politan’s other nominee, Quentin Koffey, who has a history of misstatement and distortion and no relevant experience, Ms. Brennan has operational and leadership experience in the medical devices industry at Johnson & Johnson, prior public company board service at Cardinal Health and Coupa Software,” Shimer, chair of the board’s nominating committee, said in Masimo’s statement at the time.
“Though Politan has not permitted us to interview Ms. Brennan after repeated requests, we conducted independent due diligence on her past leadership and board service experiences and feel she would bring a constructive and relevant perspective to the board,” she added.
Politan, which holds a 9% stake in Masimo, kicked off the proxy battle in May with an aim of fixing what Koffey described in a letter (PDF) to shareholders as Masimo’s “broken corporate governance.” He cited the “$5 billion drop in market value” that occurred after Masimo moved to acquire audio company Sound United for $1 billion last year and took issue with the company’s “unfocused strategy” and the size of CEO and founder Joe Kiani’s employment agreement.
The letter urged shareholders to elect Koffey and Brennan to add “independent, shareholder-aligned oversight to the board” and concluded, “Now may be the only opportunity to see real change at Masimo.”
In a presentation (PDF) responding to Politan, Masimo claimed that its stock has produced returns of more than 1,000% since its 2007 IPO and that the “valuation gap” that had opened up after the Sound United acquisition has already been closed by the company’s “outperformance” in the months since. It also pointed to higher-than-expected revenue growth under the management of the current board and said the board had spent the last year engaging directly with shareholders representing more than half of all outstanding shares.
Masimo also took aim at Koffey, claiming he had rejected invitations to “understand Masimo’s business” and to work with Masimo to elect independent directors and suggesting that his ultimate aim would be to remove Kiani as CEO—adding that his “unprincipled willingness to distort the truth in pursuit of his agenda will foster dysfunction and chaos at Masimo.”