Masimo Responds to Politan Capital’s Nomination of Director Candidates and Refutes Politan’s False Claims
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Insights
The ongoing dispute between Masimo and Politan Capital Management underscores the complexities of corporate governance and shareholder rights. From a governance perspective, board composition and the balance of power between a board and its shareholders are vital for maintaining a company's strategic direction and fiduciary responsibilities. The attempt by Politan to nominate candidates for Masimo's board suggests a push for strategic changes or a shift in governance practices, which could have significant implications for Masimo's operations and its stakeholders.
Shareholders, particularly institutional investors like Politan, often seek to influence a company's decisions when they believe that a change in direction could enhance shareholder value. However, such moves can also lead to instability, especially if the intentions behind the nominations are perceived as hostile or misaligned with the company's long-term goals. The tension between maintaining an 'independent' board and the accusations of misleading claims indicates a deeper conflict over the company's future trajectory, which could affect investor confidence and, ultimately, stock performance.
From a financial standpoint, the claims and counterclaims between Masimo and Politan Capital Management need to be assessed in terms of potential impact on Masimo's financial health and market valuation. If Politan's allegations of exclusion from board meetings and denial of information are true, this could raise concerns about transparency and management's willingness to engage with all board members, which is a red flag for investors. However, Masimo's rebuttal suggests that Politan's claims may be unfounded.
Investors should closely monitor the situation for any signs of operational disruptions or strategic misalignments that could affect the company's revenue streams, especially given the mention of a proposed separation of the consumer business. Such a separation could have material financial implications, including changes in cost structures and investment in research and development. The outcome of the board dispute could influence the company's strategic decisions and, by extension, its financial performance and stock price.
The clash between a significant shareholder and corporate management is a key event that can lead to volatility in a company's stock. Investors often view such conflicts as a risk, given the potential for distraction from the company's core business activities. The fact that Masimo is in the process of separating its consumer business adds another layer of complexity and potential risk, as corporate restructurings are often periods of heightened sensitivity for investors.
Long-term implications hinge on the resolution of this governance dispute. If Politan is successful in its bid to reshape the board, it could lead to strategic shifts that might benefit the company in the long run. Conversely, a prolonged battle could hamper Masimo's ability to execute its business plan effectively. Investors should weigh the potential for governance improvements against the risk of short-term disruptions and the cost of uncertainty.
Politan’s Efforts to Take Control of Masimo Are Not in Stockholders’ Best Interests
While Masimo respects and values the input and ideas of all its stockholders and respects their right to nominate and elect the directors of their choice, the Company believes that Politan’s efforts to take control of the Board and unseat the Company’s Chairman and CEO, Joe Kiani, run counter to stockholders’ best interests, as well as those of the hundreds of millions of patients who rely on Masimo’s innovations.
When Politan’s Managing Partner, Quentin Koffey, and its nominee, Michelle Brennan, were elected to the Board last year, Mr. Koffey claimed to be seeking a minority voice on the Board from which to offer input and direction. Yet Mr. Koffey has always been intent on taking control. While Mr. Koffey continues to suggest he desires an “independent” board, it appears from his continued attacks and misleading claims, including in Politan’s recent press release, that what he really seeks is a Board that agrees with him. Until it does, he will continue to claim the Board is not independent, despite the fact that two-thirds of the Board members are independent directors appointed in the last nine months. Masimo stockholders and the hundreds of millions of people who depend on Masimo innovation cannot afford the destructive and chaotic path that Mr. Koffey continues to pursue, even as the Company endeavors to separate its consumer business.
The facts undermine Mr. Koffey’s arguments and expose his willingness to mislead stockholders in pursuit of control of Masimo. Stockholders have a right to know the truth as outlined below:
Politan Claim: “…repeatedly held Board meetings excluding us…”
Reality: Mr. Koffey and Ms. Brennan have been invited to and attended all 11 Board meetings held since they joined the Board, along with all respective committee meetings. Mr. Koffey also attends Nominating, Compliance and Corporate Governance Committee meetings as an invited guest.
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Politan Claim: “…Chairman & CEO Joe Kiani refused to give us basic information…”
Reality: Quentin Koffey and Michelle Brennan have received thousands of pages of documents, including historical Board books and minutes and a substantial number of additional documents and analyses provided at Mr. Koffey’s request. A list of some of the documents and information Mr. Koffey has been provided is attached as Exhibit A.
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Politan Claim: “…denied access to management…”
Reality: Mr. Koffey has had numerous discussions with Masimo’s CEO and CFO both inside and outside of Board meetings and has met with nearly every member of senior management. A list of the members of senior management Mr. Koffey has had discussions with is attached as Exhibit B. In addition, as part of their on-boarding, Mr. Koffey and Ms. Brennan spent a day at Masimo with Mr. Kiani and others where they discussed the Company’s history, technology, and vision for the future. They received an extensive tour of the Company’s Discovery Lab and Home Health Lab.
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Politan Claim: “…the Board has been provided zero details [on the proposed separation]…”
Reality: The full Board has been engaged in discussions regarding a potential separation of the consumer business since Mr. Kiani originally proposed it in January following a stockholder tour―a review that Politan is now trying to take credit for. Despite being on the Board since June 2023, Mr. Koffey did not propose a separation of the consumer business until Mr. Kiani discussed it with him in January. Further, Mr. Koffey was appointed as Chair of a Special Committee formed to explore certain issues of the separation. He has discussed the structure of the separation with Board members and advisors to the Board on numerous occasions and provided input.
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Politan Claim: “…no independent director knows basic facts such as what COGS, SG&A or R&D dollars are actually spent on.”
Reality: Mr. Koffey is a member of the Audit Committee with full access to the CFO, CAO and internal and external auditors, which allows him to review the detailed financials and ask questions regarding spending. Further, all Board members have been provided detailed financial and operational information related to Masimo’s consumer and healthcare businesses. Mr. Koffey has been provided with a significant amount of information relevant to these topics and has had numerous discussions with Masimo’s management team and the Board’s advisors on these subjects. For Mr. Koffey to admit to not knowing basic facts about the Company is concerning.
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Politan Claim: “There is no budget approval process by the Board, thereby allowing the Chairman & CEO to spend however much he wants on whatever he wants without Board review, authorization or even knowledge.”
Reality: The Board reviews and discusses the Company’s annual operating plan and guidance, and the Compensation Committee approves financial targets in connection with executive compensation.
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Politan Claim: “This is why it is clearer than ever that a majority of truly independent directors are needed at Masimo…”
Reality: In the past nine months, Masimo has seated four new independent directors ―including two nominated by Politan―constituting two-thirds of the Board, ensuring continued independent oversight and fresh perspectives. The two newest independent directors, Bob Chapek and Rolf Classon, had no pre-existing relationship with Mr. Kiani or Masimo and were appointed as part of a rigorous nomination process.
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Politan Claim: “We have serious concerns that Mr. Kiani, without proper oversight, will seek to push through a spin-off with poor corporate governance and IP arrangements where assets are allocated in such a manner designed to maintain his control and influence of both separated companies.”
Reality: Mr. Kiani is committed to pursuing a separation that would result in two separate companies (consumer and healthcare) having the best chance at future success. The proposed separation would result in a full deconsolidation of the financial statements for the two businesses. The Board, including with significant input from Mr. Koffey, is fully involved in evaluating the separation and will ultimately be responsible for approving it.
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Politan Claim: “A rushed Friday afternoon announcement that the Company was exploring the Separation – which came after being informed that Politan intended to nominate directors this week – only further confirms our concerns.”
Reality: It is Politan that rushed the announcement of its nominations on the morning of Monday, March 25, in an effort to take credit for the positive market reaction following the separation announcement on Friday, March 22. Unfortunately, Politan’s press release and related Wall Street Journal article dampened the positive stock reaction that was already apparent in after-hours trading following Friday’s announcement.
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The Masimo Board and its Nominating, Compliance and Corporate Governance Committee will review Politan’s proposed nominees and present the Board’s recommendations in Masimo’s definitive proxy materials, which will be filed with the
Masimo stockholders are not required to take action at this time.
Forward-Looking Statements - Masimo
This communication includes forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, in connection with the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, statements regarding the potential separation of our consumer business, the evaluation of Politan’s nominees and the recommendations of the Board and its Nominating, Compliance and Corporate Governance Committee, as well as other matters related to the 2024 Annual Meeting. These forward-looking statements are based on current expectations about future events affecting us and are subject to risks and uncertainties, all of which are difficult to predict and many of which are beyond our control and could cause our actual results to differ materially and adversely from those expressed in our forward-looking statements as a result of various risk factors, including, but not limited to (i) uncertainties regarding future actions that may be taken by Politan in furtherance of its nomination of director candidates for election at the 2024 Annual Meeting of Stockholders, (ii) the potential cost and management distraction attendant to Politan’s nomination of director nominees at the 2024 Annual Meeting of Stockholders and (iii) factors discussed in the “Risk Factors” section of our most recent reports filed with the Securities and Exchange Commission (“SEC”), which may be obtained for free at the SEC’s website at www.sec.gov. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. All forward-looking statements included in this communication are expressly qualified in their entirety by the foregoing cautionary statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today’s date. We do not undertake any obligation to update, amend or clarify these statements or the “Risk Factors” contained in our most recent reports filed with the SEC, whether as a result of new information, future events or otherwise, except as may be required under the applicable securities laws.
Additional Information Regarding the 2024 Annual Meeting of Stockholders and Where to Find It
The Company intends to file a proxy statement and GOLD proxy card with the
Certain Information Regarding Participants
The Company, its directors and certain of its executive officers and employees may be deemed to be participants in connection with the solicitation of proxies from the Company’s stockholders in connection with the matters to be considered at the 2024 Annual Meeting. Information regarding the ownership of the Company’s directors and executive officers in the Company common shares is included in their SEC filings on Forms 3, 4, and 5, which can be found through the SEC’s website at www.sec.gov. Information can also be found in the Company’s other SEC filings. More detailed and updated information regarding the identity of these potential participants, and their direct or indirect interests of the Company, by security holdings or otherwise, will be set forth in the proxy statement and other materials to be filed with the SEC. These documents can be obtained free of charge from the sources indicated above.
Exhibit A: Documents and Information Provided to Mr. Koffey |
February 2021 Board Book |
April 2021 Board Book |
July 2021 Board Book |
October 2021 Board Book |
February 2022 Board Book |
March 2022 Board Book |
April 2022 Board Book |
August 2022 Board Book |
November 2022 Board Book |
February 2023 Board Book |
March 2023 Board Book |
May 2023 Board Book |
August 2023 Board Book |
October 2023 Board Book |
February 2024 Board Book |
10/21/2021 Board and Committee Minutes |
10/21/2022 Board Minutes |
10/25/2021 Committee Minutes |
10/4/2023 Committee Minutes |
10/7/2022 Board Minutes |
11/1/2022 Board and Committee Minutes |
1/13/2023 Board Minutes |
1/14/2022 Board Minutes |
11/7/2022 Committee Minutes |
12/21/2022 Board Minutes |
1/24/2023 Board Minutes |
1/31/2023 Board Minutes |
2/10/2021 Committee Minutes |
2/10/2022 Board and Committee Minutes |
2/13/2022 Board Minutes |
2/14/2022 Committee Minutes |
2/15/2022 Board Minutes |
2/18/2021 Board and Committee Minutes |
2/18/2022 Committee Minutes |
2/20/2023 Board and Committee Minutes |
2/22/2021 Committee Minutes |
2/27/2023 Committee Minutes |
2/3/2023 Board Minutes |
2/4/2023 Board Minutes |
2/5/2023 Board Minutes |
2/7/2022 Board Minutes |
2/7/2023 Board Minutes |
3/19/2023 Board Minutes |
3/22/2023 Board and Committees Minutes |
3/30/2022 Board and Committees Minutes |
4/1/2021 Board and Committees Minutes |
4/22/2021 Board and Committee Minutes |
4/25/2021 Committee Minutes |
4/26/2022 Board Minutes |
5/2/2022 Committee Minutes |
5/2/2023 Board Minutes |
6/14/2023 Board Minutes |
6/24/2023 Board Minutes |
7/22/2021 Board Committee Minutes |
7/26/2021 Committee Minutes |
8/16/2022 Board Minutes |
8/4/2022 Board Minutes |
8/4/2023 Committee Minutes |
8/5/2022 Committee Minutes |
9/16/2022 Board Minutes |
9/21/2022 Board Minutes |
9/2/2022 Board Minutes |
9/5/2022 Board Minutes |
9/7/2022 Board Minutes |
Q1 2021 Financial Update |
Q1 2022 Financial Update |
Q1 2023 Financial Update |
Q2 2021 Financial Update |
Q2 2022 Financial Update |
Q3 2021 Financial Update |
Q3 2022 Financial Update |
Q3 2023 Financial Update |
Q4 2021 Financial Update |
Q4 2022 Financial Update |
Q2 2023 Financial Update |
Q3 2023 Financial Update |
Q4 2023 Financial Update |
2023 and Quarterly Revenue Guidance by Clinical Platform |
2023 Board Calendar |
2024 Board Calendar |
Board Committee List |
2023 Board Contact Information |
2022-2023 Board Consulting/Advisory Agreements |
Masimo Healthcare Org Chart |
Masimo Consumer Org Chart |
2021 Full Year Forecast by Platform |
Engagement Letter 4/24/2023 |
Global Purchase Approval Matrix |
Engagement Letter 2/10/2023 |
Engagement Status Report 6/21/2023 |
Project [ ] Summary |
Project [ ] Financial Model |
Q2 & FY 2023 Revenue 7/13/2023 |
Project [ ] Analysis |
Q3 2023 UBS CA Hospital Takeaways |
Q3 2023 Earnings Call Script |
Q3 2023 Earnings |
2023 Revenue Guidance by Clinical Platform |
Wells Fargo Healthcare Conference Presentation - 9/8/2023 |
2023 [ ] Financial Projections |
[ ] Financial Overview - 10/2023 |
Amended and Restated Certificate of Incorporation - 6/26/07 |
Certificate of Amendment to Certificate of Incorporation - 6/28/2023 |
Amended and Restated Bylaws |
Audit Committee Charter |
Compensation Committee Charter |
Nominating, Compliance, and Corporate Governance Committee Charter |
Stock Incentive Plan |
Equity Incentive Plan |
Executive Bonus Incentive Plan |
Amended and Restated Non-Employee Director Compensation Policy |
Amended and Restated Severance Protection Plan & Summary Plan Description |
Equity Grant Policy |
Clawback Policy |
Non-Executive Annual Cash Bonus Award Plan |
Policy Regarding Gross-Up Provisions |
Code of Business Conduct and Ethics |
Corporate Governance Guidelines |
Director Nominees Consideration Policy |
Executive Officer Stock Ownership Policy |
Non-Employee Director Stock Ownership Policy |
Open Door Policy for Reporting, Accounting, Audit, & Other Compliance Concerns |
Policy Regarding Security Holder Recommendation of Director Nominees |
Related Person Transactions Policy |
Cash Investment Policy |
Corporate Disclosure Policy |
Insider Trading Policy |
Process for Security Holder Communications with the Board of Directors |
Q2 2023 Financial Update |
Amended Complaint |
Q2 and FY Revenue |
Engagement Letter - 2/10/23 |
Compliance & Cybersecurity Review |
Complaint Scorecards |
SOX Review |
Procedures for closing books each quarter |
Application of accounting policies |
Overview of finance group policies including cash investment policy |
Detailed walk through of financial statements |
Legal overview |
Regulatory and quality overview |
Compliance policies |
Specific items requiring detail for 2023 |
Sensor discounts |
Debt covenants |
Inventory valuation |
Impairment analysis |
Apple Litigation expenses |
Consumer expenses |
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Masimo Foundation Grants |
Cercacor Royalty |
Exhibit B: Senior Managers Mr. Koffey Has Had Discussions With |
Chief Executive Officer (Joe Kiani) |
Chief Operating Officer (Bilal Muhsin) |
Chief Operating Officer, Consumer (Blair Tripodi) |
Chief Financial Officer (Micah Young) |
General Counsel (Tom McClenahan) |
Chief Accounting Officer (Paul Hataishi) |
VP, Internal Audit |
Senior Director, Compliance |
Senior Director, Privacy/Data Protection Counsel |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240401659063/en/
Investor Contact: Eli Kammerman
(949) 297-7077
ekammerman@masimo.com
Media Contact: Evan Lamb
(949) 396-3376
elamb@masimo.com
Source: Masimo
FAQ
What is the latest development regarding Masimo and Politan Capital Management?
What are Masimo's views on Politan's efforts to take control of the board?
What claims has Politan made against Masimo's Chairman and CEO?
How has Masimo responded to Politan's claims?
What is the status of discussions regarding the potential separation of Masimo's consumer business?
