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The founder of medical technology manufacturer Masimo is demanding $400mn in payouts from his former company after being sacked as board chair.
Joe Kiani filed a lawsuit in California state court asking a judge to declare his employment agreement allows him to receive pay typically associated with a company sale. Masimo on Wednesday announced he was ousted by shareholders at the group’s annual general meeting last week. Shares rose more than 6 per cent in Wednesday trading after the announcement.
The move follows a bruising years-long tangle with activist investor Quentin Koffey and his $1.65bn firm Politan Capital.
Kiani said in his lawsuit that “ceasing to be board chair” entitled him to the vesting of 2.7mn restricted stock units, which at the current Masimo stock price is worth $360mn. He also said he was owed a $35mn cash payment, representing twice his average salary and bonus over the past two years and the funding of a “rabbi trust”. Masimo’s current market capitalisation is about $7bn.
Kiani declined to comment.
Kiani resigned as chief executive of Masimo after last week’s board election. In his resignation letter to the board demanding the payout, he wrote: “I am deeply disappointed by the way you have treated me and undermined my leadership and vision for the company.”
Kiani’s ownership stake is 8 per cent of Masimo’s outstanding shares, worth about $500mn. He told the Financial Times last week he would sell his shareholdings in the company if he was deposed from the board.
Two directors elected last week by shareholders were nominees of Politan, which now has four of the six Masimo board seats. Politan, which owns 9 per cent of the company, sued the medical technology company in 2022 over the Kiani employment contract payouts, alleging the size represented a breach of the board’s fiduciary duties. The assigned Delaware state judge had criticised aspects of the payouts in a hearing but Politan dropped the lawsuit after Koffey was elected to the board.
Kiani founded Masimo in his Orange County, California, garage in 1989, and designed a market-leading pulse oximeter used by hospitals and other healthcare providers. But the company’s stock price has fallen 60 per cent since 2021 after revenue declines and poor acquisitions.
Politan declined to comment on Kiani’s lawsuit. During this year’s proxy fight it said it could seek to keep Kiani as a board member to avoid the payouts and, regardless, the payout terms may not have been legally valid, per their previous Delaware lawsuit.
Masimo on Wednesday said Michelle Brennan, a Politan-affiliated director who joined the board last year and is a former Johnson & Johnson executive, would become interim CEO and the company would look to separate its consumer wearables business.
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