HeartWare International (NSDQ:HTWR) may face a proxy battle from a shareholder over its proposed acquisition of Israeli replacement heart valve maker Valtech Cardio, according to an SEC filing posted yesterday.
The company said it received a notice from shareholding firm Engaged Capital nominating 3 board members and opposing its proposed acquisition of Valtech.
“While we remain hopeful that the board will exercise its discretion to walk away from the proposed acquisition of Valtech, we do not believe terminating the acquisition agreement will be enough to repair the significant damage done to the credibility of the company’s leadership. We adamantly believe shareholder representation in the boardroom is desperately needed to help restore the board’s credibility with investors and ensure that the appropriate approach to generating long-term value on a risk-adjusted basis is implemented,” Engaged Capital wrote in its notice to HeartWare.
Engaged Capital officially nominated Cardiovascular Systems interim CEO Scott Ward, Tornier CFO Shawn McCormick and its own senior analyst Brendan Springstubb for 3 spots on the 8-member board.
The nominations come 6 months before the annual meeting in which HeartWare’s board comes up for re-election, normally scheduled for June.
“While we recognize that the proxy statement for the proposed acquisition of Valtech is not yet finalized, HTWR’s nomination deadline of December 30, 2015 has forced us to nominate directors now. We would prefer to work constructively with you towards a solution; however, if you choose to take the Valtech acquisition to a vote, we are fully prepared to campaign against the transaction and are equally committed to seeking the election of our nominees at the company’s 2016 annual meeting,” Engaged Capital said in the notice.
HeartWare was quick to respond to the notice, saying that it disagreed with Engaged Capital, who it said only recently became a shareholder and “does not see the benefits of the Valtech transaction.
“We remain fully committed to this transaction and are encouraged by discussions with other stockholders as they have become more knowledgeable about strategic and financial merits of the business combination. The addition of Valtech’s unique mitral and tricuspid repair and replacement platforms will position HeartWare for sustainable, long-term value on a larger scale than we believe could be achieved on a standalone basis. We believe the business combination will deepen and expand our presence in the global heart failure market, establishing us as the leader in two high-growth categories in the market, and positioning us to accelerate our long-term revenue growth and improve margins,” HeartWare wrote in an SEC filing.
Since announcing its agreement to pick up Valtech, HeartWare’s stock has sunk approximately 40%, opening at $83.88 on Sept 1 and currently trading at $50.10 as of 12:25 p.m. EST.
In November, HeartWare said it’s past the waiting period required to satisfy U.S. anti-trust regulations for its pending acquisition of Israeli replacement heart valve maker Valtech Cardio.
That marks the final anti-trust hurdle for the deal, which must still be approved by the companies’ shareholders.