DEFA14A: Masimo Urges Stockholders to Vote for Kiani and Chavez Amidst Proxy Battle with Politan Capital

Masimo's board is urging stockholders to vote for their nominees, Joe Kiani and Christopher Chavez, warning of potential value destruction if Politan Capital gains control.

Summary

• Masimo has filed its definitive proxy statement and issued a letter to stockholders regarding the 2024 annual meeting.
• The board is strongly encouraging stockholders to vote for Joe Kiani and Christopher Chavez on the GOLD proxy card.
• The board warns of a value-destructive agenda if Politan Capital gains control.
• The board highlights Masimo's track record of innovation, longstanding premium valuation, strong long-term plan, and superior director nominees.
• The board believes Politan wants to eliminate key people and practices that have fueled Masimo's long-term innovation and growth.
• The board believes Masimo is well-positioned to drive above-market organic growth and meaningful margin expansion.
• The board claims that Politan directors have obstructed the stockholder-directed expansion of the Board.
• The board claims that Politan directors have obstructed the stockholder-requested process to separate the Consumer business.
• The board believes that Politan's directors actions have not served stockholders interests; it has only served Politan's bid for control of Masimo.
• The board is pushing to achieve a 30% operating margin while maintaining its historical organic growth.
• The board believes that Politan has obstructed progress and prioritized gaining control over serving stockholders interests.
• The board believes that Politan's eagerness to discard Masimo's successful approach to running the Company as well as the leadership team that has created value for 35 years highlights what the board views as Politan's reckless disregard for risk to stockholders.
• The board believes that Politans approach to replacing a successful founder CEO, who many other companies would like to recruit, is dangerous to stockholders and other important stakeholders, including the hospitals and patients that rely on Masimos products and innovation.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While it highlights Masimo's strengths and future potential, it also expresses strong concerns about the potential negative impact of Politan Capital's involvement. The tone is defensive and argumentative, reflecting the ongoing proxy battle.

Positives

• Masimo has a track record of innovation and a longstanding premium valuation.
• The company is positioned to drive above-market organic growth and margin expansion.
• Masimo has returned to growth in its healthcare business and gained significant market share.
• The company has successfully enforced its intellectual property against Apple.
• Masimo is undertaking a process to separate its consumer business to maximize value for stockholders.
• Masimo's driver installed base has increased over 60% from 1.6 million drivers in 2017 to about 2.6 million as of the first quarter of 2024.
• Consumable revenue per driver has grown from pre-COVID levels.

Negatives

• The proxy contest with Politan Capital Management creates uncertainty.
• The board claims that Politan directors have obstructed the stockholder-directed expansion of the Board.
• The board claims that Politan directors have obstructed the stockholder-requested process to separate the Consumer business.
• The board believes that Politan's directors actions have not served stockholders interests; it has only served Politan's bid for control of Masimo.
• The board believes that Politan's eagerness to discard Masimo's successful approach to running the Company as well as the leadership team that has created value for 35 years highlights what the board views as Politan's reckless disregard for risk to stockholders.
• The board believes that Politans approach to replacing a successful founder CEO, who many other companies would like to recruit, is dangerous to stockholders and other important stakeholders, including the hospitals and patients that rely on Masimos products and innovation.

Risks

• The risk of Politan's agenda is immense, potentially destroying Masimo's innovation engine and slowing organic growth.
• Handing control to Politan could threaten Masimo's operational and financial stability.
• Politan's actions have delayed and made the pathway to a successful and value-accretive separation of the Consumer business more challenging and costly.
• The board believes that Politans approach to replacing a successful founder CEO, who many other companies would like to recruit, is dangerous to stockholders and other important stakeholders, including the hospitals and patients that rely on Masimos products and innovation.

Future Outlook

Masimo expects its innovation-led growth trajectory to drive leverage on its R&D, sales, and corporate and administrative expenses and account for a significant portion of that margin improvement. The company is focused on executing the separation of the consumer business and is pursuing both a spinoff transaction and a potential JV transaction.

Management Comments

• The letter highlights what in our view are the significant risks to the value of Masimo if control of the Board is ceded to Politan Capital Management (Politan), which we believe wants to eliminate some of the key people and practices that have fueled Masimos long-term innovation and growth and supported its premium valuation multiple.
• The letter also details the Companys excellent positioning to continue to drive above-market organic growth and meaningful margin expansion, while highlighting the expertise and experience of Masimos highly qualified director nominees.
• We remain committed to listening to and delivering value for our stockholders.
• We believe handing control of the Company to Politan would risk the destruction of value in your investment in Masimo.

Industry Context

The document highlights Masimo's position in the medical technology industry, emphasizing its premium valuation compared to peers and the importance of innovation for maintaining its competitive edge. The proxy battle reflects a broader trend of activist investors seeking to influence corporate strategy and governance in the healthcare sector.

Comparison to Industry Standards

• Masimo trades at a nearly 63% premium to select MedTech peers on a NTM P/E multiple basis, highlighting the risk to the Companys valuation if the Company loses Mr. Kianis leadership and is unable to sustain the consistent innovation that has driven its growth for decades.
• The document references Masimo's pulse oximetry technology being used in 9 of the top 10 hospitals as ranked in the 2022-23 U.S. News and World Report Best Hospitals Honor Roll, indicating a strong market position.

Stakeholder Impact

• The outcome of the proxy contest will significantly impact shareholders, employees, customers, and partners.
• The board believes that Politans approach to replacing a successful founder CEO, who many other companies would like to recruit, is dangerous to stockholders and other important stakeholders, including the hospitals and patients that rely on Masimos products and innovation.

Next Steps

• Stockholders are urged to vote using the GOLD proxy card.
• Masimo will hold its Annual Meeting of Stockholders on July 25, 2024.
• Masimo will continue to pursue both a spinoff transaction and a potential JV transaction for its consumer business.

Key Dates

Keywords

Masimo, Politan Capital, proxy contest, stockholders, Joe Kiani, Christopher Chavez, board of directors, innovation, valuation, consumer business separation, operating margin, medical technology