IRVINE, Calif.–(BUSINESS WIRE)–Masimo (NASDAQ: MASI) today issued the following statement to set the record straight regarding Politan’s “Background of the Solicitation” section of its proxy statement issued in connection with Masimo’s upcoming Annual Meeting of Stockholders.
Masimo strongly believes Politan is providing investors with inaccurate and incomplete information, as Masimo Founder, Chairman and CEO Joe Kiani noted during the Goldman Sachs Global Healthcare Conference on June 12, 2024. When referring to Politan’s proxy statement, Mr. Kiani intended to state that he believes many of the paragraphs in Politan’s “Background of the Solicitation” section contain inaccurate, incomplete and misleading information. While he inadvertently referred at the Conference to potential criminal penalties for a Board member who provides false information to stockholders, he intended to stress the importance of Board members being truthful in communications with investors. Masimo strongly rejects what it believes are false and misleading claims by Politan’s Quentin Koffey, a member of Masimo’s Board of Directors, and believes Politan should not be rewarded with votes for its candidates when it is providing stockholders with inaccurate, incomplete and misleading information in an effort to gain control of Masimo. Included below are examples of quotes from Politan’s proxy statement that Masimo strongly believes are false and misleading and Masimo’s explanation of the facts.
Politan’s Claims Regarding Masimo’s Onboarding Process
1. Politan Fiction: “Ms. Brennan and Mr. Koffey did not even receive a substantive update about the [Masimo strategic alternatives review] process until the first in-person Board meeting, which occurred on October 31, 2023—more than four months after Mr. Kiani had started the sale process.”
FACTS: Mr. Koffey began communicating with the lead banker at Morgan Stanley, Masimo’s independent financial advisor managing the strategic alternatives review process, on July 11, 2023, two weeks after he joined the Board. On August 1, 2023, as part of the Company’s onboarding process described below, the lead banker hosted a one-hour meeting with Politan directors Ms. Brennan and Mr. Koffey to bring them up to speed on Masimo’s strategic alternatives review process and to answer any questions that they had.
2. Politan Fiction: “The 2023 Newly-Elected Directors met Mr. Kiani in person on Friday, September 1, 2023 (the day before Labor Day weekend, when the Company headquarters was nearly empty).”
FACTS: By noting the timing of the September 1, 2023 meeting as an example of “the absence of customary onboarding” on the part of Masimo, Politan misleadingly suggests that the Company went out of its way to schedule the meeting on a date when the Company headquarters was nearly empty. In fact, Ms. Brennan was the one who suggested Friday, September 1, 2023 as the date of the in-person onboarding meeting. The Politan directors met with Craig Reynolds, Masimo’s Lead Independent Director, and Mr. Kiani, during this in-person onboarding meeting.1
3. Politan Fiction: “[The in-person onboard meeting] was the sole onboarding that Ms. Brennan and Mr. Koffey received other than receiving prior Board books and Board meeting minutes.”
FACTS: Ms. Brennan and Mr. Koffey’s onboarding process involved multiple meetings and exchanges, during the course of which a variety of materials and documents were provided to the Politan directors. Tom McClenahan, Masimo’s General Counsel and Corporate Secretary, reached out to Mr. Koffey on June 27, 2023, the day after the Company’s 2023 annual stockholder meeting, to discuss the Politan directors’ onboarding. Mr. Koffey informed Mr. McClenahan that he would send a list of materials Mr. Koffey wanted to review. Mr. Koffey sent the list to Mr. McClenahan on Friday, June 30, 2023, and requested that the materials be sent the following week. Mr. McClenahan cut short his family vacation and traveled back to California to compile the materials requested by Mr. Koffey. The Politan directors’ onboarding process included the following materials, meetings and calls:
Mr. Koffey has been provided with extensive financial and other information, including in connection with his work as the chair of the Special Committee, and has met with nearly every member of Masimo’s senior management. See Masimo’s press release dated April 1, 2024: https://investor.masimo.com/news/news-details/2024/Masimo-Responds-to-Politan-Capitals-Nomination-of-Director-Candidates-and-Refutes-Politans-False-Claims/default.aspx.
On January 12, 2024, Rolf Classon, an independent director who joined the Masimo Board on November 7, 2023 and who received the same onboarding as the Politan directors, described his onboarding experience in an email to Mr. Kiani:
“Dear Joe—thank you for an outstanding onboarding session yesterday and also thank you for being so generous with your time. The topics we covered, the transparency and the solid professionalism of your team made a very powerful impression on me.”
4. Politan Fiction: “To date, Ms. Brennan and Mr. Koffey have only been provided redacted minutes from [the June 24, 2023] Board meeting.”
FACTS: Masimo provided an unredacted version of the June 24, 2023 minutes to Mr. Koffey and Ms. Brennan on December 8, 2023. Moreover, in an email dated June 30, 2023, from Mr. Koffey to Mr. McClenahan, Mr. Koffey agreed that it was appropriate for the Company to redact information from Board minutes relating to then-pending litigation with Politan. Since joining the Board, the Politan directors have never disputed the prior redactions or requested that Masimo provide unredacted versions of the Board minutes.
Politan’s Claims Regarding Masimo’s Process to Add Highly Qualified Independent Directors to its Board
5. Politan Fiction: “On November 3, 2023 the Board appointed Mr. Classon as a Class II director, over the objections of the 2023 Newly-Elected Directors, who believed there was a total absence of a legitimate search process.”
6. Politan Fiction: “On January 15, 2024, the Board appointed Mr. Chapek as a Class I director, over the objections of the 2023 Newly-Elected Directors, who believed there was a total absence of a legitimate search process. Mr. Kiani referred Mr. Chapek to the Board as a director candidate, and, as noted above, the Board had previously interviewed Mr. Chapek as a potential director in the first quarter of 2023.”
FACTS: In February 2023, Masimo’s Nominating Committee retained Heidrick & Struggles (“Heidrick”), a leading independent third-party search firm, to identify qualified and skilled director candidates who previously served in a CEO position with experience in the healthcare industry or expertise in consumer markets, or who had payor/provider business model or audit experience.2 Heidrick presented the Nominating Committee with more than 50 quality candidates. The Nominating Committee interviewed a number of the candidates, but did not appoint anyone at the time due to last year’s proxy contest and Politan’s threat to sue if the Company added any new directors.
After Ms. Brennan joined the Board and Nominating Committee, Heidrick and the other Committee members brought her up to speed on the work and candidate interviews that had been done to date. Heidrick presented her with the leading candidates, which included Mr. Classon, formerly Chairman of the Executive Committee of Bayer HealthCare, Bob Chapek, formerly CEO of Disney, and others. Mr. Kiani had never met Mr. Classon and had met Mr. Chapek only once at a civic function prior to their inclusion in the search process. Ms. Brennan rejected all the leading candidates and asked that the Nominating Committee have a call with Mr. Koffey.
The Nominating Committee had a call with Mr. Koffey on October 4, 2023. During the call, the Nominating Committee agreed to modify the director search specifications. The Committee also invited Mr. Koffey to attend future Nominating Committee meetings and to participate in candidate interviews. The Nominating Committee agreed to allow additional time for Ms. Brennan and Mr. Koffey to evaluate and interview any of the more than 50 candidates that had previously been identified, and invited them to propose additional candidates for consideration.
Ms. Brennan reviewed the candidates that had previously been identified and selected four candidates. She did not propose any additional candidates. Two of the four candidates selected by Ms. Brennan declined to proceed, and two were interviewed and evaluated by the Nominating Committee. Mr. Koffey proposed four additional candidates. One of Mr. Koffey’s candidates worked for a competitor, one was unavailable to join the Board at the time, and the other two were interviewed and evaluated by the Nominating Committee.
Mr. Classon and Mr. Chapek were each interviewed several times by five different independent directors, including Ms. Brennan and Mr. Koffey. Ms. Brennan and Mr. Koffey voted against both candidates. When Ms. Brennan indicated she would vote against Mr. Chapek, Mr. Mikkelson asked her if she would vote for any of the candidates that had been identified. She replied that she would not vote for any of the candidates, including those Mr. Koffey had proposed.
7. Politan Fiction: “At [a Board meeting on May 16, 2024], the Board voted, over the objections of the 2023 Newly-Elected Directors, to propose Christopher G. Chavez as a nominee for election at the 2024 Annual Meeting to fill the Class II director position left vacant by Mr. Classon’s resignation. Mr. Kiani had referred Mr. Chavez to the Board as a director candidate. The Nominating Committee had not met to discuss Mr. Chavez’s nomination or consider alternative candidates.”
FACTS: On March 25, 2024, Politan notified Masimo of its intent to nominate two additional Politan directors to Masimo’s Board, initiating a proxy contest for control of Masimo. On April 25, 2024, Masimo’s Nominating Committee met and recommended that the Board nominate Mr. Kiani and Mr. Classon for election to the Board at the 2024 Annual Meeting. On April 30, 2024, the Board met and agreed with the recommendation, except for Mr. Koffey and Ms. Brennan. On May 3, 2024, Mr. Classon notified the Board of his decision to resign from the Board effective May 10, 2024.3
Given Politan’s proxy contest for control and the unexpected resignation of Mr. Classon, the non-Politan directors commenced a process to identify a replacement director candidate to run against the Politan candidates. The Politan directors were not included in this process due to their conflict of interest.
During this process, Christopher Chavez, a former public company CEO and director with more than 30 years of leadership experience in the medical device industry, was interviewed by all the independent non-Politan members of Masimo’s Board. Mr. Reynolds interviewed Mr. Chavez on May 10 and May 12, 2024, with further follow-up calls on May 14, 2024. Masimo’s independent director Mr. Chapek, a member of the Nominating Committee, interviewed Mr. Chavez on May 13, 2024.
Mr. Reynolds and Mr. Chapek constitute all the members of Masimo’s Nominating Committee other than Politan director Ms. Brennan. At the May 16, 2024 Board meeting, all Board members except for the Politan directors nominated Mr. Chavez to stand for election at Masimo’s 2024 Annual Meeting.4
Politan’s Claims Regarding Masimo’s Board Process
8. Politan Fiction: “On Saturday, June 24, 2023, the Board met to delegate authority to Mr. Kiani to pursue and carry out a sale of the entire Company without any obligation to provide process updates to the Board or to obtain any additional Board approvals to retain financial or other advisors.”
FACTS: The Board minutes from this meeting state that the Board delegated authority to management (not Mr. Kiani individually) and only “to coordinate with Morgan Stanley [Masimo’s independent financial advisor] on the process for exploring strategic transaction options, including the solicitation of potential third party offers (whether publicly or privately), and authorized management to retain additional financial and other advisors to assist with exploring and pursuing any such options.” This quoted language was not redacted from the June 24, 2023 Board minutes that were provided to Ms. Brennan and Mr. Koffey on July 7, 2023.
9. Politan Fiction: “When the Audit Committee was asked to sign off on the Quarterly Report on Form 10-Q for the second and third quarter of 2023 and first quarter of 2024, Mr. Koffey declined in each case to do so, believing that, despite the numerous requests, he had not received sufficient financial and operational information regarding the Company to fully evaluate the information and analysis presented in the report.”
FACTS: The Audit Committee receives a substantial set of documents each quarter for review and comments, including a quarterly financial update, external auditor-required communications, a draft Form 10-Q, a draft press release, a draft earnings presentation, and a SOX 404 and internal audit update. The Audit Committee also meets quarterly with Grant Thornton LLP, Masimo’s independent auditor, without management present and the Audit Committee members are free to ask Grant Thornton any questions regarding the Company’s financial statements in these executive sessions. Mr. Kiani does not attend Audit Committee meetings in order to facilitate an open dialogue between the independent Board members who serve on the Audit Committee and Masimo’s independent auditor. Mr. Koffey abstained from approving the 10-Qs, but did not offer any substantive changes or comments for incorporation into the filings.
10. Politan Fiction: “On February 26, 2024, the Board met to discuss and finalize the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023 (the “2023 Annual Report”). The Company’s management team discussed a draft of the 2023 Annual Report with the Board, but following such discussion, a majority of the independent directors of the Board were unwilling to sign the 2023 Annual Report until additional information that Board members had repeatedly requested was provided.”
FACTS: At the Board meeting on February 26, 2024, all of the independent directors other than Mr. Koffey and Ms. Brennan were initially prepared to sign the Form 10-K (Mr. Chapek, Mr. Classon, Mr. Mikkelson and Mr. Reynolds). When Mr. Koffey and Ms. Brennan made clear they would not sign the Form 10-K, Mr. Classon said he would defer his approval in the hope that the Politan directors would also agree to sign the Form 10-K. Masimo management met with Mr. Koffey for two and a half hours on Saturday, February 24, 2024, and spent many hours the following Sunday and Monday gathering additional information and preparing presentations for the Politan directors. The Politan directors asked questions during the presentations on February 27, 2024, which management answered, and they did not indicate they had any additional questions that remained unanswered. Despite these efforts, the Politan directors ultimately refused to sign the 10-K. All non-Politan members of the Board, including Mr. Classon, approved and signed the Form 10-K.
Politan’s Claims Regarding Access to Masimo Information
11. Politan Fiction: “In late 2023, the 2023 Newly-Elected Directors began asking to see a draft budget for FY 2024 so that the Board could review and comment prior to being asked for their approval. They were informed that no budget approval was required. The only budget information the 2023 Newly-Elected Directors were ever subsequently given was the same financial guidance provided publicly to the market. No draft or final budget was ever provided to the Board. The Board never approved a budget or even had the opportunity to provide input.”
FACTS: On October 31, 2023, Mr. Young presented to the Board, including Mr. Koffey and Ms. Brennan, details of Masimo’s financial plans and projections for 2024 through 2034. The financial information included revenue by major product category, cost of goods sold, gross profit, research and development expenses, selling, general and administrative expenses, adjusted EBIT margin, adjusted EBITDA capital expenditures and working capital requirements for the professional healthcare, consumer health and consumer audio businesses. Mr. Young also presented short-term and long-term plans for cost reduction initiatives and margin expansion. In addition, following the presentation, Mr. Young provided Mr. Koffey with the underlying Excel data used to support the presentation. The Politan directors did not ask any additional questions.
On February 13, 2024, Mr. Young presented to the Board, including Mr. Koffey and Ms. Brennan, final 2024 financial plan targets, including revenue, operating profit and margin, and EPS targets for the year. Thereafter, Bilal Muhsin, COO for Healthcare, and Blair Tripodi, COO for Consumer, presented detailed operating plans and major initiatives for their respective businesses. Mr. Koffey and Ms. Brennan complimented the presentations. Financial guidance for 2024 was approved by the Board, and short- and long-term financial targets for executive compensation were approved by the Compensation Committee.
12. Politan Fiction: “The Company’s 2023 Annual Report disclosed a $10 million impairment with respect to the Sound United business segment (less than 1% of the purchase price). As a member of the Audit Committee, Mr. Koffey asked to review the impairment analysis multiple times. To date, he has never been able to review the Company’s impairment analysis and does not know why only $10 million of impairment has been taken.”
FACTS: Mr. Koffey attended an Audit Committee meeting on November 6, 2023, that included a review and discussion of management’s ASC 350 and 360 impairment/recoverability tests which resulted in a tradename impairment in Q3 and why goodwill was not impaired as of Q3. The Audit Committee members received supporting materials and participated in the discussions. During the Audit Committee meeting, the Audit Committee members met separately with Grant Thornton LLP, Masimo’s independent auditor, without management present, and were free to ask Grant Thornton any questions regarding the Company’s impairment analysis in this executive session.
13. Politan Fiction: “Following the dramatic decline in sales during the second quarter of 2023, the 2023 Newly-Elected Directors asked to speak with the head of U.S. sales for the Company’s professional healthcare business. To date, they have never been able to speak with such executive and therefore have not been able to adequately learn about the discounting and bulk orders whose discontinuation appear to have dramatically impacted sales starting in the second quarter of 2023.”
FACTS: On July 13, 2023, Mr. Koffey requested and participated in a two-hour call with members of Masimo management, including Bilal Muhsin, Masimo’s Chief Operating Officer for Healthcare and head of worldwide sales, to discuss the decline in second quarter sales. Management presented detailed sales and ordering data and trends for the second quarter as well as management’s assessment of the reasons for the decline. Mr. Koffey asked questions and received answers.
14. Politan Fiction: “From when they first joined the Board and regularly thereafter, the 2023 Newly-Elected Directors asked for information on research and development (“R&D”) spending so they could understand how much was being spent on what initiatives. To date, they have never received any information on R&D beyond the publicly disclosed consolidated R&D number disclosed in the Company’s quarterly reports and 2023 Annual Report. The 2023 Newly-Elected Directors made similar requests about cost of goods sold and selling, general, and administrative expenses and have similarly received no more detailed information than what has been publicly disclosed in the Company’s quarterly reports and 2023 Annual Report.”
FACTS: As explained above, on October 31, 2023, Mr. Young presented to the Board, including Mr. Koffey and Ms. Brennan, details of Masimo’s financial plans and projections for 2024 through 2034. The information presented included research and development spending, cost of goods sold, and selling, general and administrative expenses for the professional healthcare, consumer health and consumer audio businesses. In addition, as the chair of the Special Committee, Mr. Koffey was provided updated plans and projections as well as additional detailed financial information regarding R&D and SG&A expenses in the first quarter of 2024. Mr. Koffey and the Special Committee’s financial and legal advisors spent extensive time with Mr. Young, the COOs of Masimo’s Healthcare and Consumer businesses, and Masimo’s financial and legal advisors to review the information provided and understand the details of both businesses.
Politan’s Claims Regarding the Board’s Decision to Pursue a Separation of the Consumer Business
15. Politan Fiction: “Mr. Kiani then revived the idea proposed by Politan nearly a year earlier to separate the consumer business from the rest of the Company.”
FACTS: Mr. Kiani first proposed the separation to Mr. Koffey on January 29 2024. Mr. Koffey and Ms. Brennan never proposed a separation of the consumer business to Masimo’s Board or management. In fact, while Masimo hears from stockholders that Mr.
Contacts
Investor Contact: Eli Kammerman
(949) 297-7077
ekammerman@masimo.com
Media Contact: Evan Lamb
(949) 396-3376
elamb@masimo.com
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