Activist investor Politan Capital Management (Politan), an 8.8% stockholder of Masimo Corporation (Masimo), has filed a lawsuit in the Court of Chancery of the State of Delaware against the company and its board of directors in response to attempts by the company to institute a stockholder rights agreement – commonly known as a poison pill.
Politan alleges that many of the Bylaw Amendments adopted by Masimo are unprecedented among publicly traded companies. They require providing information that a nominating stockholder either does not have access to, or is prohibited from disclosing, due to confidentiality obligations.
Politan recently submitted a draft nomination notice with more than 100 pages of information about the firm and its Managing Partner, Quentin Koffey. Masimo responded that the disclosures were insufficient and did not comply with the bylaws, further reinforcing that the Bylaw Amendments, in effect, preemptively block stockholders from nominating candidates for election to the Board.
Politan’s suit seeks to declare the Bylaw Amendments unenforceable, find that the Company’s directors breached their fiduciary duties by approving and implementing the amendments, invalidate the change of control provisions in the CEO’s employment agreement that could result in hundreds of millions of dollars of value being transferred to Chairman and CEO Joe Kiani even if only two of directors on the Board were replaced, and enjoin Masimo and the Board from taking any actions to prevent Politan from exercising its rights to nominate candidates for election to the Board.
Masimo has responded by issuing statement saying that:”The bylaw amendments were adopted by the Masimo Board after thoughtful consideration. They are designed to improve transparency to ensure that stockholders receive information relevant to an informed vote. We reject the premise that an activist hedge fund attacking a public company should be allowed to hide its web of financial entanglements and significant financial backers.”
