Sends Letter to Masimo Shareholders and
Releases 160-Page Investor Presentation
Urges Shareholders to Help Deliver Immediate
Change by Voting for Both of Politan’s Independent and Ideally
Qualified Nominees Darlene Solomon and William Jellison on the
WHITE Card
Shareholders Can Visit www.AdvanceMasimo.com
for Further Information
Politan Capital Management (together with its affiliates,
“Politan”), an 8.9% shareholder of Masimo Corporation (“Masimo” or
the “Company”) (NASDAQ: MASI), today sent a letter to the Company’s
shareholders outlining why a majority of truly independent
directors are urgently needed in the Masimo boardroom. Politan also
released a detailed investor presentation making the case for
change and why independent nominees – Darlene Solomon, former Chief
Technology Officer of Agilent, and Bill Jellison, former Chief
Financial Officer of Stryker – would bring critically needed
expertise to Masimo’s Board of Directors. The full presentation can
be found here. Additional information can be found on
www.AdvanceMasimo.com.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20240626071390/en/
Figure 1 (Graphic: Business Wire)
The full text of the letter is below:
Dear Fellow Masimo Shareholders,
Politan owns 9% of Masimo – an approximately $600 million
investment that makes us one of the Company’s largest shareholders.
We invested in Masimo over two years ago because we believe in the
Company’s tremendous promise. However, it has become clear that to
protect shareholder value, let alone realize Masimo’s potential,
the Company needs a majority of truly independent directors. This
is why we have nominated to the Board Darlene Solomon, former Chief
Technology Officer of Agilent, and Bill Jellison, former Chief
Financial Officer of Stryker – two unquestionably independent
nominees who bring crucial expertise needed in Masimo’s
boardroom.
We have made numerous efforts to avoid another proxy contest.
Each of our settlement proposals has offered Mr. Kiani the
opportunity to remain on the Board. Our offers still stand. Masimo
has proposed to seat both Dr. Solomon and Mr. Jellison, but only if
we agreed to a separation transaction on the terms that Mr. Kiani
had sought earlier this year: Mr. Kiani’s full departure from
Masimo in order to serve as Executive Chairman of a newly spun off
Consumer Business that would take with it licenses to all of
Masimo’s IP, Mr. Kiani’s pick of employees and trade secrets, the
Masimo trademark, the corporate headquarters and jet, $150 million
in cash and for Mr. Kiani personally the immediate payout of ~$400
million, an entirely new compensation package for his new role and
control of the Consumer company either through controlling shares
granted to him essentially for free or his personal selection of
the Board. We rejected this proposal when it was first made, yet
every subsequent Masimo settlement offer has been structured to
ensure Mr. Kiani can achieve similar results. Protecting
shareholders from the permanent impairment that would result from
such transfers of Masimo assets is one of the reasons why
shareholders voted Michelle Brennan and me on to Masimo’s Board
last year, and the fact that Masimo’s other directors would condone
these types of transfers underscores why further change is needed
in the boardroom.
As a result, the only option left open to us is to bring our
concerns directly to shareholders. Last year, shareholders
overwhelmingly elected us to Masimo’s Board. Yet, Mr. Kiani and his
selected directors ignored the vote results and refused to repair
Board oversight. Instead, they embarked on a damaging entrenchment
strategy, including the currently proposed separation – a
transaction that is not the divestment of Sound United that
shareholders want, but instead is a transfer of valuable IP, trade
secrets and trademarks to an entity Mr. Kiani will lead.
Unfortunately, ignoring shareholder votes and employing
extraordinary entrenchment mechanisms is not a new pattern of
behavior at Masimo, but rather is one that we believe has
continually recurred and worsened over the past decade. The vote
this year is likely the last chance shareholders will have to break
this cycle and enact meaningful change.
Fundamentally, what this upcoming vote is about is simple:
fixing the prolonged and deliberate refusal by Masimo to permit
independent oversight. However, in light of the Board’s
unprecedented actions, this vote will also have broader reaching
implications in establishing what conduct institutional
shareholders will tolerate. Consider the following:
- Masimo’s share price has underperformed its own selected
peers by over 90% in the past five years: Despite nearly all of
its healthcare revenues coming from pulse oximetry products sold
into a duopoly market with high barriers to entry and generating
significant recurring revenues, Masimo has underperformed all its
peer groups over all relevant time periods.
1 Year
3 Year
5 Year
Masimo Total Shareholder Return
Performance vs.
As of June 21, 2024(1)
Masimo’s Proposed Peers(2)
(14%)
(36%)
(98%)
Sell-Side Peers(3)
(30%)
(62%)
(75%)
Broader Medical Device
Peers(4)
(13%)
(32%)
(36%)
Medical Devices Index(5)
(22%)
(43%)
(55%)
Russell 3000 Index
(45%)
(74%)
(102%)
- Governance remains broken at Masimo: The Board does not
even see, much less approve, a budget, and information flows to the
Board solely at the CEO’s discretion. As a result, the Board is
uninformed about basic financials as well as material risks such as
regulatory inquiries, whistleblower matters and share pledges by
the CEO.
- Lack of Board oversight has resulted in widespread harms to
the Company: All Masimo stakeholders have suffered from the
Board’s failures, with the share price languishing, growth
stagnating, financial targets missed by wide margins, regulatory
investigations by the DOJ and the SEC opened, whistleblower
lawsuits filed and employee disapproval of the CEO
skyrocketing.
- Shareholders have objected to these oversight failures for
over a decade, yet the Board’s response has been further
entrenchment: Shareholders have voted against Masimo’s
directors and Say-on-Pay in extraordinary numbers over the past
decade, placing Masimo in the bottom 1% of US public companies year
after year. Instead of improving, Masimo’s Board has employed
unprecedented entrenchment mechanisms in the form of
spinoffs/separations (previously Cercacor, today the “Separation”),
change in control payments, bylaw amendments, and a Board structure
that has drawn widespread rebuke from Delaware Courts, governance
experts and shareholders.
- The proposed Separation poses significant risks and is not
the divestment of Sound United that shareholders want: Instead
of selling Sound United, whose acquisition has proved disastrous,
Mr. Kiani is pursuing a separation of a newly formed entity that
will take Masimo’s trademarks, trade secrets and licenses to its
IP, thereby risking the creation of a new competitor as a result.
There is no proper Board oversight process in place, as Mr. Kiani
disbanded the Special Committee formed for this purpose and has
only engaged with a single party that he selected without even
notifying the Board of the entity’s name until after he signed a
term sheet. The last time Mr. Kiani oversaw a spinoff at Masimo, it
created Cercacor – resulting in a ~$1 billion value transfer to an
entity majority-owned by Mr. Kiani and a poison pill at Masimo that
took a decade to get out from under.
- The opportunity at Masimo is immense: While the issues
presented above are significant, the opportunity to deliver returns
for shareholders is massive. Dr. Solomon and Mr. Jellison can help
to refocus Masimo as a growth business targeting 8-10% revenue
growth and 35+% EBIT margins and in the process unlock $10+ billion
of shareholder value over time. Achieving these results requires a
focus on discipline, oversight and shareholder value that has been
lacking at the Company and will only come from a majority of truly
independent directors on Masimo’s Board.
- This is shareholders’ last chance at meaningful change:
For more than two years, Politan has navigated unprecedented
impediments thrown up by Masimo’s Board to allow shareholders the
opportunity to seat a majority of truly independent directors, and
we doubt any shareholder will ever try to do so again. Further,
following the 2024 AGM, Mr. Kiani will enter into an irreversible
separation transaction with permanent valuation implications. For
both of these reasons, we believe this is shareholders’ last chance
for meaningful change at Masimo.
Governance Remains Broken at
Masimo
When shareholders overwhelmingly elected Ms. Brennan and me to
the Masimo Board last year, I was optimistic we could work
productively with the rest of the Board to drive positive change.
Unfortunately, our efforts were continually rebuffed, as the Board
refused to give us basic information, denied us access to
management, repeatedly held Board meetings excluding us and refused
to even consider allowing any review of capital allocation or
strategy. Mr. Kiani and his selected directors have been adamant
that no governance changes are necessary. As a result, governance
remains broken at the Company.
- Shareholders’ concerns over lack of oversight have driven
multiple collapses in Masimo’s share price: In 2022, Masimo’s
market value declined by $5 billion after a $1+ billion cash
acquisition of Sound United, as shareholders feared destructive
capital allocation would continue unchecked. In 2023, the share
price declined by 50% as shareholders were concerned management had
inflated numbers in advance of the 2023 proxy contest. In 2024, the
share price declined 15% as shareholders worried about an SEC
subpoena and Mr. Kiani’s comments that he intended to enter a
binding separation transaction before the 2024 AGM. Each of these
declines reveal the long-simmering crisis of confidence in Masimo’s
oversight. See Figure 1.
- There is no oversight of management: The Board does not
review, approve or see a budget – only 2% of Masimo’s expenditures
are even potentially subject to approval and essentially no
expenditure has even made it to the Board for approval for over two
years. This results in Mr. Kiani spending whatever he wants however
he wants.
- The Board is uninformed: No procedures exist for
information to reach directors. Rather, it is provided solely at
Mr. Kiani’s discretion. As new directors, our repeated requests for
basic information and meetings with senior management were
consistently denied even in the wake of the stunning Q2 2023 sales
decline and Mr. Kiani’s explanation that he was unaware of
discounting practices occurring among the sales force. The Board
was also effectively not informed of material risks like the DOJ
and SEC investigations, the whistleblower lawsuit involving sixteen
former employees and Mr. Kiani’s recent pledging of 75% of his
stock ownership as collateral for a personal loan.
- There was no legitimate Board expansion process, and Chris
Chavez represents more of the same: Directly contrary to
management’s public comments at the time that a director search was
underway, for the first three months following the 2023 AGM the
search firm was officially placed on hold and the Nominating
Committee did not meet even once. Only after the Company realized
it would miss Q3 2023 earnings did a pro forma window-dressing
search process quickly commence and conclude. The result was adding
directors the legacy Board had selected in March 2023, prior to the
2023 AGM in June. Mr. Chapek was never identified by a search firm,
but rather was an acquaintance of Mr. Kiani’s, proposed by him and
placed in the 2026 class of directors so that he would not be up
for a shareholder vote for nearly three years. Similarly, Mr.
Chavez was never identified by a search firm, but rather is a 20+
year acquaintance of Mr. Kiani’s and proposed by him. While Mr.
Kiani claims to hardly know him, the fact is that the Masimo
Foundation’s only investment in the last five years was in Mr.
Chavez’s company (which went bankrupt).
- Mr. Kiani’s selected directors firmly control all aspects of
the Board: Mr. Reynolds, like Mr. Chapek, was selected by Mr.
Kiani to join the Board. Despite being nearly voted off the Board
when he was last up for election in 2022 and ranking in the bottom
1st percentile of any public company director in voting support
during his decade tenure, Mr. Reynolds is the Lead Independent
Director and Chair of every Board committee. Mr. Reynolds and Mr.
Chapek together make up a two-thirds majority of each Board
committee and, along with Mr. Kiani, comprise a majority of the
Board. Notably, Masimo’s committee charters place authority for
deciding Mr. Kiani’s compensation with the Compensation Committee.
The full Board has never voted on or even been briefed on any
aspect of CEO compensation.
Broken Governance Has Resulted in
Significant Harms for Stakeholders
The Board’s oversight failures have harmed shareholders,
employees and patients. While Masimo’s share price, financial
performance and operations have declined, its regulatory risks and
employee dissatisfaction with the CEO have risen. See Figure 2.
- Employee disapproval of Masimo’s CEO is the worst in the
industry: Based on Glassdoor data6 that allows employees to
assess their CEOs without fear of retribution, Mr. Kiani is the
lowest rated CEO of any peer in the industry by a substantial
margin. The second worst is viewed 32% more favorably than Mr.
Kiani and the industry median is nearly 100% more favorably
viewed.
- Consistently missed financial targets and a failed consumer
strategy: Masimo has not come close to the targets laid out at
the December 2022 Analyst Day, missing 2023 targets for revenue and
EBIT by 13% and 27%, respectively. Current 2024 guidance
contemplates similar or worse misses for revenue and EBIT of 17%
and 31%, respectively. Management in 2017 said they expected to
achieve 30% operating margins within a “few years” but now, seven
years later, they are still aspiring to 30% margins – albeit not
until 2029, more than a decade after first introducing the target.
Sound United revenue and EBIT have declined since the acquisition
by 22% and 49%, respectively, and the all-cash, debt-financed
transaction is now dilutive. In addition to the $1+ billion Sound
United price tag, Masimo has spent approximately ~33+% of its
earnings on Consumer Healthcare only for its products to completely
fail: the Freedom Watch cannot be launched due to manufacturing
bugs and Stork revenue is ~$0.
- Multiple investigations by regulators and lawsuits by
whistleblowers: In the past four months, Masimo has received
multiple DOJ subpoenas regarding its recall processes, an SEC
subpoena regarding accounting allegations by multiple employees,
and whistleblower lawsuits involving 16 former employees.
Incredibly, the Board was not even notified of the March DOJ and
SEC subpoenas until more than a month after they were received.
Similarly, the full Board only learned of the presence of the
whistleblowers when a detailed legal complaint was publicly filed.
The Board has no process in place to oversee any of these matters
and instead relies solely on the discretion of management to handle
them.
- Mr. Kiani’s egregious compensation, lavish corporate
spending, related party transactions and concerning stock
pledges: Masimo pays Mr. Kiani annual compensation 2x that of
peer CEOs, while at the same time paying $19 million annually to
Cercacor (where Mr. Kiani is CEO and majority owner). Mr. Kiani
also is permitted to spend lavishly on inessential items such as
his personal use of a G550 private jet that he has used 56 times in
the last two years alone to fly to his personal ranch only a
two-hour drive away. Notably, in the months following the collapse
in Q2 2023 revenues, the private jet was in Ibiza, Anguilla and
Santa Barbara and does not appear to have been meaningfully used,
if at all, to visit clients. Additionally, Mr. Kiani pledged $400
million of Company stock, representing 6% of the Company’s shares
and 75% of his holdings, as collateral for personal loans without
informing, much less getting approval from, the current Board about
any aspect of the arrangement.
For Over a Decade Shareholders Have
Objected, Yet Masimo Refuses to Change and Resorts to
Entrenchment
Broken governance harming Masimo is not a new issue. In fact,
shareholders have voted against Masimo’s Board in extraordinary
numbers for well over a decade. Masimo is in a category all of its
own, as the Company ranks last or among the bottom couple percent
of all US public companies across numerous governance measures and
is unique in ranking so poorly across all of them. See Figure
3.
- The bottom 0.1% for votes against executive
compensation: Masimo has ranked in the bottom 0.1% of the
entire Russell 3000 for “Say-on-Pay” since such votes were first
required in 2011. In six of the last 13 years, Masimo has failed
this vote. Only three other companies have had as many
failures.
- The bottom 2% for “withhold” votes against Board
members: Over the past decade, Masimo shareholders have
withheld against Masimo directors at consistently high levels. Only
twice during this period has even a single independent director
done better than the bottom 33rd percentile. Last year, 84% of
shareholders voted against Masimo’s Lead Independent Director,
Michael Cohen, thereby removing him from the Board. Nonetheless,
Mr. Kiani immediately hired Mr. Cohen back as a paid advisor to the
Company and had him attend the October 2023 in-person Board meeting
(one of only two that have been held in the past year).
These extraordinarily high votes against Masimo’s Board year in
and year out have not resulted in improved governance. Rather,
Masimo’s Board has concocted ever more extreme entrenchment devices
to avoid shareholder accountability.
- Cercacor separation: When Masimo spun off Cercacor, it
placed in what is nominally titled a licensing agreement a trigger
that if for any reason Mr. Kiani is not Masimo’s Chairman and CEO,
Masimo would owe a minimum royalty payment of $17 million annually
to Cercacor (where Mr. Kiani is CEO and majority owner). For nearly
a decade this payment was ~30+% of Masimo’s EBIT and served as an
effective poison pill entrenching Mr. Kiani’s position at Masimo.
Today, Masimo pays Cercacor more than $19 million annually (and
therefore has outgrown the impact of the trigger). However, the
value of these ongoing payments to Cercacor equates to a ~$1
billion value transfer from Masimo shareholders.
- CEO employment agreement: As part of his 2015 employment
agreement, amended in 2017 and 2022, Mr. Kiani received an enormous
$400+ million change in control provision (at current value) with a
single trigger tied to minority changes in Masimo’s Board. Last
year a Masimo director acknowledged in a deposition that he hadn’t
even bothered to read the agreement when he approved it. Mr. Kiani
agreed to waive a portion of these provisions after a Delaware
judge wrote, “This is an astounding amount of consideration…truly
amazing…[these provisions] preclude the board from exercising its
statutory and fiduciary duties to manage the corporation in the
best interests of the corporation and its stockholders, and thus
amount to abdication… I’m not sure that for a lot of these
provisions, and certainly for them together… there really is a
parallel.” The judge went on to note, “these extraordinary change
of control provisions were stuffed in what is otherwise titled a
compensation agreement.” While Politan decided to drop the
litigation without prejudice shortly after joining Masimo’s Board,
we believe the remaining provisions would not be upheld in court.
Because we have made a standing offer and the Company retains the
ability to add Mr. Kiani back to the Board following the election
of Dr. Solomon and Mr. Jellison, we believe Mr. Kiani’s change in
control provision is not implicated in this year’s election,
irrespective of whether Mr. Kiani decides to rejoin the Board.
- Advance notice bylaw amendments: In 2022, Masimo adopted
preclusive bylaw amendments – described by ISS as “an affront to
shareholders” – in an attempt to block shareholders such as Politan
from nominating directors. Directors under deposition acknowledged
they adopted the provisions because they believed they would lose a
proxy contest with Politan. Politan had to go to court to remove
the bylaws with the Delaware judge noting, “There should be zero
doubt, however, that the repeal of the challenged advance notice
bylaws provisions here had remarkable value and was, frankly, an
extraordinary corporate benefit.”
Separation Transaction Poses
Significant Risk to Shareholders and Epitomizes Problems Plaguing
the Company
Politan, like nearly all Masimo shareholders, would like to see
a clean exit from the disastrous Sound United acquisition. However,
Mr. Kiani adamantly refuses to do this and continues to insist the
acquisition has been the right decision. The
announced Separation that Mr. Kiani is pursuing should not be
viewed as synonymous with selling Sound United – instead, it is a
transfer of valuable IP licenses, trade secrets and trademarks that
could permanently impair Masimo’s valuation and create a future
competitor while personally benefiting Mr. Kiani.
- Mr. Kiani has continually sought a Separation that risks
permanently impairing Masimo: In multiple different proposals
this year, Mr. Kiani has sought a Separation allowing for his full
departure from Masimo in order to serve as Executive Chairman of a
newly spun off Consumer Business that would take with it licenses
to Masimo’s IP, the Masimo trademark, Mr. Kiani’s selection of
engineers who would bring trade secrets with them, the corporate
headquarters and jet, $150 million in cash and provide Mr. Kiani
personally the immediate payout of $400+ million, a new
compensation agreement for his new role and control of the Consumer
company either through controlling shares granted to him
essentially for free or his personal selection of the Board.
- Masimo’s Board formed a Special Committee that refused to
accept Mr. Kiani’s proposal, so Mr. Kiani dissolved the Special
Committee: The Board established a Special Committee in
February which hired Sullivan & Cromwell LLP and Centerview
Partners to evaluate a potential Separation of Masimo’s Consumer
Business. After doing significant analyses aided by these blue-chip
advisors, the Special Committee found that granting licenses for
consumer applications of Masimo’s IP carried significant risk for
Masimo and could result in a substantial valuation overhang. As the
site of clinical care shifts out of the hospital and into the home
in the future, Masimo would find itself competing with the Consumer
entity as the line between the hospital-at-home and consumer market
is a thin one and evolving. The Special Committee returned to Mr.
Kiani a term sheet that rejected or modified many of his demands
and proposed a process, overseen by independent directors, to
properly determine the field-of-use and boundary conditions for any
IP transfers. Ten days later, Mr. Kiani moved to dissolve the
Special Committee and publicly announced the Separation.
- Mr. Kiani is pursuing the transaction today with a single
counterparty and no actual Board oversight: Mr. Kiani is
engaging with a single counterparty he selected to carry out a
transaction that raises the exact same IP concerns and similar
related party concerns the Special Committee objected to. There is
no broader process considering any other counterparties or
alternatives such as a sale of Sound United. Further, Mr. Kiani has
kept the Board completely in the dark. He signed an NDA with the
counterparty on March 20th without ever informing the Board that
discussions were occurring or even that the counterparty existed.
It was only on May 13th, after Politan made a 220 demand, that Mr.
Kiani shared with the Board a copy of a signed term sheet that had
already been entered into by Mr. Kiani and the counterparty. Since
then, Board members have received limited updates relating to the
transaction. Beyond the term sheet, all we know is that Mr. Kiani
intends to be Chairman of the new entity and has an understanding
that the counterparty views Mr. Kiani’s ongoing involvement in the
new entity as essential. Independent directors should not be
required to make 220 demands in order to obtain basic information
about material proposed transactions.
- Mr. Kiani has done this before, with Cercacor, and it cost
shareholders ~$1 billion and a decade-long poison pill: As
described above, Mr. Kiani has done this before. The last time Mr.
Kiani oversaw a separation, it was the spinoff of Cercacor whose IP
licensing agreement served as a valuation overhang on Masimo for
many years, carried with it a poison pill embedded in a licensing
agreement and ultimately has cost Masimo shareholders approximately
$1 billion.
Politan wants a Separation done right. We have been asking for a
strategic review of the Sound United business and consumer
healthcare spending for over 18 months. All transaction
alternatives should be considered, including a straightforward sale
of Sound United. There are complex questions that must be
appropriately overseen by independent directors around issues like
intellectual property, trademarks, trade secrets, the Apple
Litigation, and how such a transaction could trigger provisions of
Masimo’s licensing agreement with Cercacor. A transaction led by
Mr. Kiani without true independent oversight would be irreversible
and pose significant risk to Masimo’s shareholders in both the near
and long term.
Shareholder Nominees Can Safeguard
Shareholder Value and Deliver Substantial Share Price
Appreciation
We believe that Masimo urgently needs a truly independent Board
to safeguard shareholder value and realize the Company’s full
potential. This is why Politan worked with an independent,
nationally recognized executive search firm to identify two
directors that have no pre-existing relationship with Politan or
Masimo and who bring crucial expertise that is sorely needed on the
Board.
- Dr. Darlene Solomon, former CTO of Agilent Technologies,
Inc. (NYSE: A), brings deep expertise in R&D strategy, a
successful public board track record and experience overseeing
three large scale, successful separation transactions requiring
critical expertise in the division of IP and retention of technical
talent. Darlene is currently an independent director at Materion
Corporation (NYSE: MTRN) and Novanta Inc. (Nasdaq: NOVT). She is
ideally suited to help Masimo navigate a separation of its Consumer
Business and the associated IP division and technical talent
retention matters in a manner that maximizes value. She can also
support the Company in aligning its product portfolio and R&D
pipeline to realize its long-term growth potential.
- William (Bill) Jellison, former CFO of Stryker
Corporation (NYSE: SYK), brings deep medical technology executive
capability, successful public board experience and a strong track
record of value-creating capital allocation including significant
transaction expertise. Bill is currently an independent director at
Avient Corporation (NYSE: AVNT) and Anika Therapeutics, Inc.
(Nasdaq: ANIK). He is ideally suited to chair the Audit Committee,
as Masimo has not had an experienced audit chair in over five
years, and could help oversee cost structure optimization efforts
and the alignment of spending to long-term growth plans.
***
While the issues outlined in the letter above are significant,
the opportunity to deliver returns for shareholders is immense. We
have released a 160-page presentation with significant details
laying out the tremendous opportunity we see to unlock
approximately $10 billion of value by refocusing Masimo as an
innovation-led growth company focused on its core hospital and
hospital-at-home markets, thereby targeting a reacceleration to
8-10% annual revenue growth and an optimized cost structure that
supports investment in successful product launches and delivers
35+% EBIT margins. Importantly, these changes will better position
Masimo to improve patient outcomes – as we cannot further help
patients if our new products are not selling. In addition, our 35+%
EBIT margin goal contemplates R&D spend that is higher than the
long-term levels targeted by Mr. Kiani just last month. For years,
Masimo has repeatedly promised new product revenue that never
materializes and margin expansion which seems to constantly take
two steps back for each one step forward. After the July 25th AGM,
Masimo can finally have an experienced, independent Board of
successful medical-tech executives that eagerly want to hear from,
learn from and empower Masimo’s employees. And with that, Masimo
can finally deliver for its shareholders and stakeholders.
Electing only one of our two nominees would not be sufficient to
effect this type of change. Adding just Dr. Solomon or Mr. Jellison
would result in a deadlocked Board – something broadly criticized
by governance experts and which would merely continue the status
quo under which Mr. Kiani can do whatever he wants however he wants
with no effective Board oversight.
Between now and the shareholder vote, you are likely to hear
from Masimo that Politan’s “agenda” would irreparably disrupt the
Company and cause the exit of Mr. Kiani, which would be an
existential threat to Masimo’s future. This is false. First and
foremost, we have repeatedly made clear that we are willing to work
with Mr. Kiani if he can accept truly independent oversight.
Further, Mr. Kiani does not run the day-to-day healthcare business,
and if he does transition out of the CEO role, we have laid out a
detailed plan in our investor presentation that would minimize any
disruption. Finally, if Mr. Kiani’s departure would be so
destructive to Masimo, why was he himself offering his exit to the
Special Committee just a few months ago as part of the proposed
separation of the Consumer Business? We would also remind
shareholders that last year Mr. Kiani promised he would quit the
Company if our nominees were elected. This exit obviously did not
occur.
You will also likely hear between now and the vote an array of
absurd claims attacking anything and everything about Politan –
including our motivations at Masimo. Unfortunately, this is simply
how Mr. Kiani does business. We ask you to ignore these
distractions and focus on the facts. Most importantly, we ask you
to focus on the exceptional opportunity at Masimo and the chance
this election represents to not only deliver on this opportunity,
but also to make clear that shareholders deserve better than the
decade of entrenchment tactics and broken governance that has
occurred at Masimo.
Sincerely,
Quentin Koffey
Politan Capital Management
Biographies of Politan’s
Nominees
Dr. Darlene Solomon is a scientist by training who
recently completed a 39-year career at Agilent Technologies, Inc.
At Agilent, she served in numerous leadership roles – including as
Chief Technology Officer and Senior Vice President under three
successive CEOs – and helped define the company’s technology
strategy and R&D priorities.
As part of Agilent’s corporate transformation toward becoming a
market-leading life sciences and diagnostics company, Darlene
helped oversee three different separations of Agilent, Avago and
Keysight. As a result, she brings critical expertise that would
inform the appropriate division of Masimo’s IP in a separation of
its Consumer Business, as well as the understanding of how best to
lead and retain technical talent while executing forward-looking
business growth.
Darlene is an independent director on the boards of Materion
Corporation (NYSE: MTRN), where she is a past member of the Audit
and Risk Committee and currently on the Compensation Committee and
the Nominating, Governance, and Corporate Responsibility Committee,
and of Novanta, Inc. (Nasdaq: NOVT), where she is a member of the
Compensation Committee. Darlene is also a member of the National
Academy of Engineering and serves on multiple academic and
government advisory boards focused on science, technology, and
innovation. Darlene holds a BS from Stanford University and a Ph.D.
from MIT.
William “Bill” Jellison is a veteran medical technology
executive and finance expert with decades of relevant experience,
including as the former Chief Financial Officer of Stryker
Corporation. Bill would bring extensive medical technology and
financial oversight expertise. He would also be a natural fit to
chair the Masimo Board’s Audit Committee, which has not been
chaired by a director with any audit committee or even public
company board experience in nearly five years. Bill presided over
billions of dollars of M&A transactions during his tenure as
Chief Financial Officer and would bring significant experience to
the evaluation of a separation transaction at Masimo.
While at Stryker, Bill also oversaw all areas of international
finance, including accounting, planning and analysis, SEC
reporting, acquisition valuations, internal audit, tax and treasury
activity. Prior to this, Bill spent 15 years at Dentsply
International in a number of leadership positions, including Chief
Financial Officer and as a Senior Vice President with full P&L
responsibilities for some of Dentsply’s operating divisions in the
U.S., Europe and Asia.
Bill is an independent director on the boards of Avient
Corporation (NYSE: AVNT) where he is chair of the Audit Committee
and a member of the Environmental, Health and Safety Committee, and
of Anika Therapeutics (Nasdaq: ANIK), where he serves on the
Capital Allocation Committee. He holds a BA from Hope College in
Holland, Michigan.
***
Your vote is important, no matter how many
shares of Common Stock you own. We urge you to sign, date, and
return the enclosed WHITE universal proxy card today to vote FOR
the election of the Politan Nominees and in accordance with the
Politan Parties’ recommendations on the other proposals on the
agenda for the 2024 Annual Meeting.
_________________________ Data and quotes throughout this letter
are sourced from Masimo and other companies’ filings, presentations
and transcripts, third-party data sources including Bloomberg,
legal filings and transcripts. Data on shareholder voting is
sourced from Institutional Shareholder Services Corporate
Solutions. A more detailed description of calculations and company
analysis will be available in Politan's upcoming shareholder
presentation.
1 Bloomberg data as of June 21, 2024, Friday prior to filing of
presentation. 2 As per Masimo Letter to Shareholders on June 17,
2024. Masimo presents itself as a scaled growth company and its
peers include: ALGN, DXCM, EW, ISRG, PODD, RMD. 3 Sell-Side
Peers are peers used for Wolfe Research healthcare segment
valuation and include: ABT, BSX, EW, RMD, STE. 4 As per Masimo
Letter to Shareholders on June 17, 2024. Broader Medical Device
Peers include: ABT, ALGN, BAX, BDX, BSX, CNMD, DXCM, EW, GEHC,
GETTIB SS, HAE, IART, ICUI, ISRG, JNJ, LIVN, LMAT, MDT, MMSI, OMCL,
PHG, PODD, RMD, SYK, TFX, ZBH. 5 Dow Jones US Medical Equipment
Index (selected by Masimo historically in their proxy statement). 6
Per Glassdoor data as of June 21, 2024. Includes 473 reviews.
If you have any questions, require assistance
in voting your WHITE universal proxy card or voting
instruction form, or need additional copies of Politan’s proxy
materials, please contact D.F. King using the contact information
provided here:
D.F. King & Co., Inc. 48 Wall
Street New York, New York 10005 Stockholders call
toll-free: (888) 628-8208 Banks and Brokers call: (212)
269-5550 By Email: MASI@dfking.com
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
The information herein contains “forward-looking statements.”
Specific forward-looking statements can be identified by the fact
that they do not relate strictly to historical or current facts and
include, without limitation, words such as “may,” “will,”
“expects,” “believes,” “anticipates,” “plans,” “estimates,”
“projects,” “potential,” “targets,” “forecasts,” “seeks,” “could,”
“should” or the negative of such terms or other variations on such
terms or comparable terminology. Similarly, statements that
describe our objectives, plans or goals are forward-looking.
Forward-looking statements are subject to various risks and
uncertainties and assumptions. There can be no assurance that any
idea or assumption herein is, or will be proven, correct. If one or
more of the risks or uncertainties materialize, or if any of the
underlying assumptions of Politan Capital Management LP (“Politan”)
or any of the other participants in the proxy solicitation
described herein prove to be incorrect, the actual results may vary
materially from outcomes indicated by these statements.
Accordingly, forward-looking statements should not be regarded as a
representation by Politan that the future plans, estimates or
expectations contemplated will ever be achieved.
Certain statements and information included herein may have been
sourced from third parties. Politan does not make any
representations regarding the accuracy, completeness or timeliness
of such third party statements or information. Except as may be
expressly set forth herein, permission to cite such statements or
information has neither been sought nor obtained from such third
parties. Any such statements or information should not be viewed as
an indication of support from such third parties for the views
expressed herein.
Politan disclaims any obligation to update the information
herein or to disclose the results of any revisions that may be made
to any projected results or forward-looking statements herein to
reflect events or circumstances after the date of such information,
projected results or statements or to reflect the occurrence of
anticipated or unanticipated events.
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
Politan and the other Participants (as defined below) have filed
a definitive proxy statement and accompanying WHITE universal proxy
card or voting instruction form with the Securities and Exchange
Commission (the “SEC”) to be used to solicit proxies for, among
other matters, the election of its slate of director nominees at
the 2024 annual stockholders meeting (the “2024 Annual Meeting”) of
Masimo Corporation, a Delaware corporation (“Masimo”). Shortly
after filing its definitive proxy statement with the SEC, Politan
furnished the definitive proxy statement and accompanying WHITE
universal proxy card or voting instruction form to some or all of
the stockholders entitled to vote at the 2024 Annual Meeting.
The participants in the proxy solicitation are Politan, Politan
Capital Management GP LLC (“Politan Management”), Politan Capital
Partners GP LLC (“Politan GP”), Politan Capital NY LLC (the “Record
Stockholder”), Politan Intermediate Ltd., Politan Capital Partners
Master Fund LP (“Politan Master Fund”), Politan Capital Partners LP
(“Politan LP”), Politan Capital Offshore Partners LP (“Politan
Offshore” and, collectively with Politan Master Fund and Politan
LP, the “Politan Funds”), Quentin Koffey, Matthew Hall, Aaron
Kapito (all of the foregoing persons, collectively, the “Politan
Parties”), William Jellison and Darlene Solomon (such individuals,
collectively with the Politan Parties, the “Participants”).
As of the date hereof, the Politan Parties in this solicitation
collectively own an aggregate of 4,713,518 shares (the “Politan
Group Shares”) of common stock, par value $0.001 per share, of
Masimo (the “Common Stock”). Mr. Koffey may be deemed to own an
aggregate of 4,714,746 shares of Common Stock (the “Koffey
Shares”), which consists of 1,228 restricted stock units (the
“RSUs”) as well as the Politan Group Shares. Politan, as the
investment adviser to the Politan Funds, may be deemed to have the
shared power to vote or direct the vote of (and the shared power to
dispose or direct the disposition of) the Politan Group Shares,
and, therefore, Politan may be deemed to be the beneficial owner of
all of the Politan Group Shares. The Record Stockholder is the
direct and record owner of 1,000 shares of Common Stock that
comprise part of the Politan Group Shares. Both the Politan Group
Shares and the Koffey Shares represent approximately 8.9% of the
outstanding shares of Common Stock based on 53,182,247 shares of
Common Stock outstanding as of June 13, 2024, as reported in
Masimo’s definitive proxy statement filed on June 17, 2024. As the
general partner of Politan, Politan Management may be deemed to
have the shared power to vote or direct the vote of (and the shared
power to dispose or direct the disposition of) all of the Politan
Group Shares and, therefore, Politan Management may be deemed to be
the beneficial owner of all of the Politan Group Shares. As the
general partner of the Politan Funds, Politan GP may be deemed to
have the shared power to vote or to direct the vote of (and the
shared power to dispose or direct the disposition of) all of the
Politan Group Shares, and therefore Politan GP may be deemed to be
the beneficial owner of all of the Politan Group Shares. Mr.
Koffey, including by virtue of his position as the Managing Partner
and Chief Investment Officer of Politan and as the Managing Member
of Politan Management and Politan GP, may be deemed to have the
shared power to vote or direct the vote of (and the shared power to
dispose or direct the disposition of) all of the Koffey Shares.
IMPORTANT INFORMATION AND WHERE TO FIND IT
POLITAN STRONGLY ADVISES ALL STOCKHOLDERS OF MASIMO TO READ ITS
DEFINITIVE PROXY STATEMENT, ANY AMENDMENTS OR SUPPLEMENTS TO SUCH
PROXY STATEMENT AND OTHER PROXY MATERIALS FILED BY POLITAN WITH THE
SEC AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO CHARGE ON
THE SEC’S WEBSITE AT WWW.SEC.GOV. THE DEFINITIVE PROXY STATEMENT
AND OTHER RELEVANT DOCUMENTS, ARE ALSO AVAILABLE ON THE SEC
WEBSITE, FREE OF CHARGE, OR BY DIRECTING A REQUEST TO THE
PARTICIPANTS’ PROXY SOLICITOR, D.F. KING & CO., INC., 48 WALL
STREET, 22ND FLOOR, NEW YORK, NEW YORK 10005 STOCKHOLDERS CAN CALL
TOLL-FREE: (888) 628-8208.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240626071390/en/
Investor Contact D.F. King & Co., Inc. Edward
McCarthy emccarthy@dfking.com
Media Contacts Dan Zacchei / Joe Germani Longacre Square
Partners dzacchei@longacresquare.com /
jgermani@longacresquare.com
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