Masimo (Nasdaq: MASI) says an undisclosed potential joint venture partner is offering an $850–950 million purchase price for a majority stake in its consumer business.
That’s less than the $1.025 billion that Masimo spent in 2022 to acquire Viper Holdings, the parent company of Sound United and its high-end audio and home theater systems. Masimo officials said they plan to negotiate for a higher price.
MASI shares were down more than 2% in midday trading today, to $109.41 apiece. The S&P 500 is up slightly.
The SEC disclosure this week came amid a flurry of filings as the digital health pioneer disclosed Street-beating preliminary Q2 revenue numbers and traded new accusations with Politan Capital Management in a proxy fight leading into the company’s July 25 shareholders meeting.
Politan is seeking CEO Joe Kiani’s ouster a year after it won a heated fight for two seats.
Under pressure from Politan, the maker of pulse oximeters, wearable health trackers, and other health monitoring devices has been looking at options to split off its consumer business.
In a July 8 filing with the SEC, Masimo said it received a non-binding term sheet confirmation from a potential joint partnership suitor on July 2. On top of the cash purchase price range for the majority stake of the consumer business, the term sheet included a short-term extension of the exclusivity period between the parties through mid-August 2024. One or two additional companies may join the joint venture and need time for their own due diligence.
Morgan Stanley and outside counsel are advising Masimo on a potential deal.
Masimo had Street-beating Q2 revenue
Meanwhile, Masimo reported today that it brought in $496 million during the quarter ended June 29, 2024. The preliminary results represented 9% growth and beat the Wall Street analysts consensus of $493.56 million.
Healthcare revenue was roughly $344 million, up 22% growth. Non-healthcare revenue was roughly $152 million, a 13% decline.
“We are excited to see the growth and strength of our healthcare business in the second quarter combined with a very strong order backlog as we enter the third quarter,” Kiani said in a news release.
“Sensor utilization and hospital census has meaningfully improved from last year. Further, our healthcare team’s ability to dramatically increase our market share has been on full display over the last few years, and we are off to a great start in 2024. We achieved a record second quarter in terms of converting customers to our technologies with an expected $134 million of incremental contract value, which is the best sign of a healthy future for Masimo.”
BTIG analysts kept their Buy rating on Masimo stock. “This was a clearly a good print for MASI,” said Marie Thibault and Sam Eiber.
Another twist in the Masimo-Politan proxy fight
Kiani’s board seat is on the line in the shareholders’ vote. Company management is also running Christopher Chavez — a 30-year medtech veteran who previously held CEO roles at Trivascular and Advanced Neuromodulation Systems Inc. (ANSI) — for an independent director slot. Politan is meanwhile running former Stryker CFO Bill Jellison and former Agilent Technologies SVP and Chief Technology Officer Darlene Solomon for the spots.
Politan this week disclosed a letter to Masimo’s board in which it leveled an accusation of empty voting, a practice in which a hedge fund investor will borrow shares in order to boost its voting power in a shareholder vote. According to Politan, a hedge fund supporter of Kiani engaged in the practice around the June 13 record date for the vote. It’s asking that Masimo management move the change the record date for the shareholder vote.
In an email response yesterday to Politan’s Quentin Koffey disclosed by Masimo, lead independent director Craig Reynolds said:
“I am disappointed that you chose to make your allegations public and believe it was disingenuous not to reference the corporate secretary’s written response from last Friday that we were looking into the matter and would be having a board meeting to discuss it. In the meantime, we confirm that neither Mr. Kiani nor any other member of management or non-Politan member of the board has ever had any agreement, arrangement or understanding related to the trading or voting of the shares in question. Observing that a large number of shares were cast in favor of Mr. Kiani and Mr. Chavez is not a compelling reason to change a properly established record date, which would disenfranchise Masimo stockholders.”
