The future of an iconic Orange County medtech entrepreneur – who was once compared to Steve Jobs – is at stake this week.
Masimo Corp.’s annual shareholder meeting, scheduled for Sept. 19, will determine whether Joe Kiani will remain as chairman of the company he co-founded in 1989.
The Irvine maker of non-invasive medical devices has been the target of a six month-long proxy battle with activist investor Politan Capital Management. Politan already has two members on the board and is seeking two more seats, which would give the activist majority control. Kiani has threatened to leave the company if he is ousted from the board.
An estimated 300 employees have also said they will leave with Kiani.
The meeting, originally slated for July 25, was postponed to give shareholders sufficient time to review revised proxy materials, according to the company.
Since Politan announced its proxy battle in March, the company’s market cap has fallen almost $2 billion to $6 billion. At press time, shares traded at $112.12 each (Nasdaq: MASI).
Both Politan and Kiani own about 8.9% of the company. Each stake was worth $540 million at press time.
A Friend of Presidents
Kiani, who immigrated from Iran when he was 9 years old and knew three words of English, thought he could invent a better way to measure blood oxygen levels. He started his company in his Aliso Viejo garage.
The company’s products became famous for reducing faulty readings on the oxygen levels of newborn babies and thus helped reduce deaths and blindness. The devices, primarily sold to hospitals, leapt in popularity during the COVID-19 pandemic because of their ability to remotely monitor patients.
Masimo, which went public in 2007, is expected to generate $2.1 billion in revenue this year, according to the average estimate of analysts.
Kiani has also become well known in Democrat Party circles as the friend of Bill Clinton and Joe Biden. After Biden gave his speech at The Democratic National Convention last month, the president and his family stayed at Kiani’s ranch in Santa Ynez.
Politan founder and Managing Partner Quentin Koffey decided to acquire a stake, then valued around $750 million, following Masimo’s $1 billion acquisition of Carlsbad-based consumer company Sound United in 2022.
That acquisition wasn’t well received by investors, sending Masimo’s shares tumbling; the company’s market value fell $5.2 billion in one day.
Politan last year won a proxy battle that resulted in Koffey and former Johnson & Johnson executive Michelle Brennan joining Masimo’s board of directors.
Since joining the board, the activist says he’s been shut out of crucial discussions and decided to seek control of the company.
Politan’s two new candidates are former Agilent Chief Technology Officer Darlene Solomon and former Stryker and Dentsply Chief Financial Officer William Jellison.
Dueling Press Releases
In the past few months, both sides have issued dueling press releases to make their case and accuse the other side of malfeasance. Masimo is also suing Politan in federal court.
“Koffey is desperate to take control of Masimo at any cost, for personal gain and to the ultimate detriment of the company and long-term stockholder value—using lies, misrepresentations, mischaracterizations, and deceit, as well as misusing confidential company information he gained from inside the Masimo boardroom itself,” according to a lawsuit filed by Masimo in July. “And it appears to be working.”
Masimo last week sent a letter to shareholders ahead of the upcoming meeting, urging them to vote for Kiani and Christopher Chavez, whose nomination was announced in July.
Chavez, said to be Kiani’s planned successor, was most recently chairman, CEO and president of TriVascular Inc. and held other leadership roles at other medtech companies including Advanced Neuromodulation Systems Inc. and Johnson & Johnson.
The letter noted that a vote for Politan would leave Masimo’s leadership and strategy in uncertainty.
“The inexperienced and divisive Quentin Koffey will control Masimo, and he has no concrete plans for our business or to fill the potential talent gap,” Masimo board members Craig Reynolds, Bob Chapek and Kiani said in the letter.
Chapek, a former Walt Disney Co. executive, joined Masimo’s board in January. He served as Disney’s CEO for nearly three years before the company’s board fired and replaced him with Bob Iger in November 2022.
Proxy-advisory firm Institutional Shareholder Services Inc. (ISS) has joined Glass Lewis in advising Masimo shareholders to vote for Politan’s nominees, citing the company’s tumbling share price under the current board.
ISS additionally raised concerns regarding the proposed spinoff of Masimo’s consumer business, which was announced in March. The company is also considering a possible joint venture after receiving an offer between $850 million and $950 million from an undisclosed bidder for a majority stake in the consumer unit.
“Shareholders have no reason to believe that management can be trusted to structure a pivotal transaction on their behalf without the safeguard of further board independence,” ISS said in its report.
“Thus, change is not only warranted on the basis of fundamental corporate governance failings but is absolutely necessary to ensure that the separation does not compromise shareholder value.”
Supporters of Kiani said they are prepared to leave in the event he’s ousted from the company.
In July, Chief Operating Officer Bilal Muhsin told the board that he intends to resign if Kiani is removed as chairman and CEO, according to regulatory filings.
“I strongly disagree with the false accusations made by Politan in its recent fight letter and deck and have no intention of remaining with the company if Quentin Koffey and Politan take control of it,” Muhsin said in the letter.
There are 300 other reported employees, including senior executives, who have expressed they would leave if Koffey assumed control of Masimo, according to a Sept. 9 shareholder letter.
In its own letter to shareholders, Politan refuted claims that Kiani’s departure would lead to company disruption.
“In truth, Mr. Kiani does not run the day-to-day healthcare business, was already planning to transition out of the CEO role, and Politan has laid out a detailed plan that would minimize any disruption,” Politan wrote in the Sept. 5 letter.
Big Fights
Masimo is accustomed to large fights.
Masimo has won several big cases in the past two decades, collecting hundreds of millions of dollars in settlements from giant medtech companies Royal Philips Electronics NV and Nellcor, now a unit of Medtronic.
Apple Inc., one of the world’s largest companies by market cap, and Masimo are suing each other over patent infringements. In litigation, it’s been revealed that Apple executives a decade ago called Kiani the Steve Jobs of medtech.
Last October, Masimo won a trade case against Apple for infringing on its pulse oximetry technology. The U.S. International Trade Commission as a result placed an import ban on Apple’s newest smartwatches that went into effect Dec. 26. Kiani called it a victory for “the integrity of American patent system and safety of people.”
“It affirms that even the largest and most powerful companies must respect the intellectual rights of American inventors and must deal with the consequences when they are caught infringing others’ patents,” Kiani said in a statement.
Apple is appealing the ITC’s decision in a legal fight that could take a year, reported Reuters.
