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Activist Investor Ups Masimo Stake, Pressure

Politan Seeks Board Seat; Poison Pill Enacted

Device maker Masimo Corp. (Nasdaq: MASI), which already has a lot on its plate with a pivot to new products for consumers, has found itself in the crosshairs of a notable activist investor.

New York City-based Politan Capital Management on Sept. 23 revealed that it owns 4.6 million shares, or 8.8% of the shares, of the Irvine-based company.

That’s up from 8.4% a few months ago, when Politan’s stake in the company, acquired starting in June, was first disclosed.

Politan’s stake is close to the number of shares, 4.8 million, owned by founder and Chief Executive Joe Kiani, according to the company’s latest proxy statement, which was filed in March.

BlackRock Inc. is the largest institutional shareholder, 16.3%, in Masimo, Orange County’s fifth-most valuable public company with a market cap of around $7 billion.

CoreLogic Efforts

Quentin Koffey, who last year began Politan, has recent history in OC.

In 2020, when he was a partner at the Senator Investment Group, Koffee teamed up with Cannae Holdings to bid for Irvine-based real estate and mortgage analytics company CoreLogic.

While CoreLogic rejected their initial $66 bid, it eventually accepted an $80 bid from a rival group of bidders.

Koffey is known on Wall Street for never losing a proxy fight and staying out of the limelight by “projecting a calm but firm negotiating style,” Reuters reported. Rather than pump and dump a stock, his firm likes to take a longer view by staying invested for three to four years, seeking a two-times return on investment.

Politan ran a behind-the-scenes campaign late last year at managed-care company Centene Corp., which added several new directors to its board and helped prompt its longtime CEO Michael Neidorff to step down, the Wall Street Journal reported.

A portion of Politan’s Masimo capital comes from EnTrust Global, an investment firm run by Gregg Hymowitz that backs many of activist investors’ biggest bets, people familiar with the matter told the WSJ.

Bitter Pill

On Sept. 2, Koffey met with Masimo management, expressing an interest in joining the five-member board.

A week later, Politan said Masimo adopted a “poison pill” and amended corporate bylaws requiring additional conditions for board nominations and/or elections. In response, Politan told Masimo on Sept. 20 its concerns with the changes and requested that the amendments be removed.

“Mr. Koffey has made several requests for a meeting with the Issuer’s full board, but none has been scheduled,” Politan wrote in an SEC filing.

New Markets

Masimo is known for developing pulse oximetry devices for hospitals; it’s considered a sticky business with high barriers to entry. It’s also a limited total addressable market around $2.3 billion. Masimo last year reported $1.2 billion in revenue.

Kiani is aiming to broaden his potential market by selling watches with Masimo technology, called the W1, and has signaled he will enter hearing aids as well. These two industries that have combined TAMs approaching $50 billion.

Investors soured on Masimo after its largest ever acquisition, the $1 billion buy of Sound United, a consumer audio device maker with a worldwide distribution network. The company’s shares still haven’t recuperated from a 37% one-day drop—which cost Masimo about $5.2 billion in lost market value—when the deal was announced last February.

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Peter J. Brennan
Peter J. Brennan
Peter J. Brennan has been a journalist for 40 years. He spent a decade in Latin America covering wars, narcotic traffickers, earthquakes, and business. His resume includes 15 years at Bloomberg News where his headlines and articles sometimes moved the market caps of companies he covered by hundreds of millions of dollars. His articles have been published worldwide, including the New York Times and the Washington Post; he's appeared on CNN, CBC, BBC, and Bloomberg TV. He was awarded a Kiplinger Fellowship at The Ohio State University.
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