Politan, Masimo activist, issues 'final call' for shareholders to push for change at med-tech firm.

• Politan, a Masimo activist, presented a renewed argument for change in an attempt to secure two additional board seats at the medical device company.
• Joe Kiani, the CEO of the company, is being targeted for removal from the board by Politan, who believes that the company can achieve $10 billion in shareholder value with proper governance and supervision.
• Despite Politan winning two board seats, Masimo shares have fallen 18% since the previous meeting.

Activist investor Politan Capital Management claims that despite voting for change at last year's annual meeting, shareholders in medical device maker have seen their governance concerns go largely unresolved.

Politan, which has already won two board seats, is seeking to gain more control by nominating two additional directors to the company's board. Without their election, management will continue to operate without oversight. Masimo founder and CEO Joe Kiani has stated that if shareholders vote him out, he will not return.

Politan wrote to Masimo shareholders on Wednesday, stating that this is their final opportunity for significant change. The letter, obtained by CNBC, outlined the company's case to investors before the meeting.

Politan accused Masimo of poor management, inadequate independent board leadership, and a faulty acquisition that removed the company from its core business last year.

Last year, Koffey and Michelle Brennan were elected to the board after being swayed by Politan's arguments.

Koffey wrote in a letter that Masimo's board does not review, approve, or see a budget, despite governance improvements falling short of what shareholders deserve.

Koffey wrote that this leads to Mr. Kiani spending whatever he wants in any way he desires.

This year's meeting has seen Politan nominate Darlene Solomon, the former chief technology officer at , and Bill Jellison, the ex-chief financial officer at .

Despite the S&P 500 gaining 26% since last year's meeting, Masimo's stock has fallen 28%, with no meaningful changes in the company's management and no oversight from the board over CEO Kiani's direction.

The company could increase its shareholder value by $10 billion with effective leadership. Its current market value is $7 billion.

The upcoming vote is about fixing Masimo's prolonged and deliberate refusal to allow independent oversight, as Koffey stated in the latest letter.

The proxy fight last year was fiercely contested and costly. Masimo took proactive measures to prevent Politan from gaining control, enacting bylaws that required the firm to disclose its shareholder list. However, many of these efforts were unsuccessful as a Delaware judge rejected them. Additionally, Kiani threatened to resign if Koffey was elected as the new CEO.

A representative for Masimo did not immediately return a request for comment.

'Shareholders spoke'

In the proxy fight this year, Kiani is sitting in one of the director seats that Politan is aiming to take over.

"Politan stated in its presentation that shareholders spoke, yet nothing altered."

Politan used Masimo's $1 billion acquisition of Sound United, which resulted in a 37% drop in Masimo's stock, as an example of the negative consequences of poor governance structure during his pitch to shareholders last year.

Masimo announced in March that it would address investor concerns by separating its consumer brands from its medical technology business, despite Kiani's ongoing assertions that the partnership would aid in bringing Masimo's technology into homes.

The matter remains unresolved as Kiani dissolved the spinoff's special committee, led by Koffey, after rejecting or modifying many of the CEO's demands. Kiani had been seeking licenses to Masimo's valuable intellectual property, the Masimo name, its corporate headquarters and jet, as well as a $150 million cash infusion, according to filings from both the activist and the company.

Mr. Kiani's "egregious compensation" and "lavish" spending were highlighted by Politan, including his use of Masimo's corporate jet for Caribbean and European vacations and his pledging of hundreds of millions of dollars worth of stock.

Kiani revealed to CNBC earlier this year that a third party was interested in a joint venture, but he did not disclose any specifics. Koffey stated that he and Masimo's board were informed of the potential partner's name only after a tentative deal had been signed, and shareholders have not yet been informed.

"Koffey wrote in Wednesday's letter that Politan wants a separation done correctly and has been requesting a strategic review of the Sound United business and consumer healthcare spending for over 18 months."

In the letter, Politan pointed out that investors have been opposing the company's pay practices and director selections for over a decade.

Politan pointed out that Masimo has consistently ranked at the bottom 0.1% of companies in the Russell 3000 in terms of say-on-pay votes. If Kiani loses his board seat or the company completes the spinoff in his preferred manner, he would be entitled to a change-in-control payout of more than $400 million, according to regulatory filings.

The success of Politan's campaign is crucial because the management's stubbornness may make it difficult for another shareholder to launch a similar challenge in the future.

"Politan has faced unprecedented obstacles from Masimo's board for more than two years, according to the activist. The activist believes that no shareholder will attempt to do so again."

Masimo CEO Kiani believes that healthcare investors often overlook the consumer aspect of the business.