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Activist investor plans second fight at Masimo, sending shares up 5%

Joe Kiani, CEO, Masimo

Scott Mlyn | CNBC

Health technology companies Masimobest known for his successful patent disputes Apple Watch is facing a proxy fight for the second time in two years – against the same activist investor who now sits on the company’s six-member board.

Quentin Koffey’s Politan Capital, a roughly 9% shareholder, said it would appoint two directors to Masimo’s board, just days after the company said it would spin off a struggling business unit.

Shares rose as much as 12% in Monday morning trading on the news.

Masimo said Friday it would explore a spinoff of its audio division, which it acquired in 2022 for $1 billion. The acquisition, which frustrated some investors and was deemed unrelated to Masimo’s core focus on health technology, sparked Politan’s first proxy dispute at the company.

Now Politan is seeking two more seats on the board to ensure the company completes the spinoff. Politan said the announcement was made “hasty” after the activist told the company last week that it would seek additional board seats.

Politan’s nominees include former Agilent executive Darlene Solomon and former Stryker CFO Bill Jellison. Solomon led research and development at Agilent, while Jellison drove Stryker’s M&A strategy.

If successful, the activist investor would control four of the company’s six board seats.

Politan has already won two board seats for Koffey and health care executive Michelle Brennan in his previous proxy fight, which was watched closely by investors given the intensity of the battle and management’s unusual tactics to fend off Koffey.

Koffey said he was initially “optimistic” that Masimo’s board would work with Politan.

“Unfortunately, our efforts were repeatedly rebuffed as Chairman and CEO Joe Kiani refused to provide us with basic information, denied us access to management, repeatedly held board meetings without us, and refused to even consider conducting a review capital allocation or strategy,” Koffey said in a press release.

In the previous proxy dispute, Kiani showed no desire to settle the dispute with the activist fund. Some of Masimo’s maneuvers to fend off Politan, such as the unprecedented attempt to force activists to detail their other investments and their clients before seeking a nomination to the board, drew widespread criticism.

Politan said in his press release that they hoped to avoid another proxy fight.

“Darlene and Bill are undeniably qualified to help the company, and their immediate addition would have the advantage of avoiding a costly and distracting contentious election,” Koffey said.

“Members of the board, including Quentin Koffey, have been instrumental in discussions about the separation dating back to January, when Joe Kiani first proposed the idea following a hearing tour with shareholders,” a Masimo spokesman said, noting that two – Third of the company’s board of directors had joined within the last nine months.

The spokesperson added: “The proposed separation is also consistent with the company’s prior commitment to reassess the strategy and structure of its consumer business within three years of the acquisition of Sound United.”

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