Merit Medical Systems, Inc. (NASDAQ: MMSI), a leading manufacturer
and marketer of proprietary disposable devices used in
interventional, diagnostic and therapeutic procedures, particularly
in cardiology, radiology, oncology, critical care and endoscopy,
today announced that it has reached an agreement with Starboard
Value LP and its affiliates (“Starboard”), an investment firm which
owns approximately 8.7% of Merit’s outstanding common stock,
pursuant to which the Company has nominated three new independent
directors —Lonny Carpenter, David Floyd and James T. Hogan—for
election to the Merit Board of Directors at the Company’s upcoming
2020 Annual Meeting of Shareholders, scheduled to be held on June
22, 2020.
In connection with the new director nominations,
Merit also announced that Nolan E. Karras, David M. Liu, M.D. and
Lynne N. Ward will not stand for re-election at the 2020 Annual
Meeting and Franklin Miller, M.D. will resign from the Board not
later than immediately following the 2020 Annual Meeting. Merit’s
Board intends to appoint Ms. Ward to fill the vacancy resulting
from Dr. Miller’s resignation, which would place her in the class
of directors standing for re-election at the 2021 Annual
Meeting. Kent W. Stanger, a founder of Merit, has previously
announced that he will not stand for re-election at the 2020 Annual
Meeting. Following the 2020 Annual Meeting, Merit’s Board will be
comprised of nine directors, seven of whom will be independent.
Merit’s Board intends to select a new Lead Independent Director
following the 2020 Annual Meeting.
In addition, Merit’s Board will form a new
Operating Committee, which will work with Merit’s management team
to establish operating margin targets to be announced no later than
the announcement of Merit’s third quarter 2020 financial results.
Messrs. Carpenter, Floyd and Hogan and Fred P. Lampropoulos,
Merit’s Chairman and Chief Executive Officer, will serve as members
of the Operating Committee with Mr. Carpenter serving as Chair.
“We are pleased to welcome Lonny, David and Jim,
three medical device industry veterans, to the Board of Directors,”
said Mr. Lampropoulos. “They each bring industry experience and
perspectives that we believe will support our mission of enhancing
shareholder value. The actions we have taken across the company are
already yielding positive results, including increased efficiency
and progress towards operating margin improvement, as part of our
goal to become a leaner, more efficient growth company. I am
excited to work together with the entire Merit team as we continue
to build on our momentum.”
Mr. Lampropoulos continued, “On behalf of the
entire Board, I thank Kent, Nolan, Frank and David for their
distinguished service and many contributions to Merit. We
appreciate their leadership in positioning the Company for
continued success and wish them the very best.”
Jeff Smith, Chief Executive Officer of
Starboard, said, “We appreciate the constructive dialogue we have
had with Merit over the last several months. We believe that Merit
is an outstanding company and I am confident the appointment of
these new directors will bring additional insights and valuable
expertise as Merit focuses on improving profitability and growth.
We look forward to continuing to work closely with management and
the Board as we pursue our common goal of enhancing shareholder
value.”
Pursuant to the agreement, Starboard agreed to
withdraw its director nominations previously submitted to the
Company and support the Board’s full slate of directors at the 2020
Annual Meeting. Starboard also agreed to abide by customary
standstill provisions and voting commitments. The complete
agreement will be filed by the Company with the U.S. Securities and
Exchange Commission (“SEC”) as an exhibit to the Current Report on
Form 8-K.
Skadden, Arps, Slate, Meagher & Flom LLP is
serving as legal counsel to Merit and Wells Fargo Securities, LLC
and Perella Weinberg Partners are serving as Merit’s financial
advisors. Olshan Frome Wolosky LLP is serving as legal counsel to
Starboard.
About Lonny
Carpenter
Mr. Carpenter served for almost thirty years in
various roles at Stryker Corporation, including Group President of
Global Quality & Operations and Europe/Canada/Latin
America/Middle East/Africa Commercial Operations, Group President
of Global Quality and Operations, Group President of Instruments
and Medical, President of the Medical Division and served in
multiple Vice President roles in Operations, Supply Chain, Project
Management, and Acquisition Integrations. Prior to Stryker
Corporation, Mr. Carpenter served in the United States Army where
he rose to the rank of Captain, Army Aviation Helicopter Pilot,
101st Airborne Division.
Since May 2018, Mr. Carpenter has served on the
Board of Directors of Novanta Inc. Mr. Carpenter also sits on the
Board of two privately held companies, The Boler Company, since May
2019, and Orchid Orthopedics Solutions, since July 2019.
Mr. Carpenter received a Bachelor’s degree in
Engineering from the United States Military Academy at West
Point.
About David
Floyd
Mr. Floyd has served on the board of directors
of NN, Inc. since May 2016 and the board of Healthcare Outcomes
Performance Company since April 2020. Mr. Floyd also serves as an
external advisor to Bain & Company and GLG Institute, since
March 2019 and August 2018, respectively. Previously, Mr. Floyd
served as a Group President of Stryker Corporation from November
2012 to June 2019. Prior to that, Mr. Floyd served in numerous
senior leadership roles in several medical device companies,
including as U.S. President and then Worldwide President of the
DePuy Orthopaedics Division (now DePuy Synthes) at Johnson &
Johnson. Mr. Floyd also served as General Manager and then
President of the Spine Division at Abbott Laboratories, President
and Chief Executive Officer of AxioMed Spine Corporation, and Vice
President of U.S. Market and then President of Centerpulse
Orthopedics Inc.
Previously, Mr. Floyd was a member of the board
of two privately held companies, Apos Therapy Ltd. from 2012 to
2015 and AxioMed from 2004 to 2005. He also was a founding board
member from 2009 to 2012 and first CEO from 2011 to 2012 of
OrthoWorx, a business league supporting the orthopedic medical
device manufacturing industry.Mr. Floyd received his Bachelor’s
degree from Grace College.
About James
Hogan
From 2005 to 2016, Mr. Hogan served in various
roles at Medtronic plc, including President of Latin America and
Director of Gastroenterology and Urology for Western Europe. Prior
to that, Mr. Hogan founded three medical device companies in the
cardiology, urology and vascular fields.
Since 2019, Mr. Hogan has served as a director
of ProLung, Inc. Mr. Hogan also sits on the Board of
Xenocor, Inc., a privately-held company, a position he has held
since 2019. Additionally, he has served as a Consulting
Partner to BioConnexus.
Mr. Hogan holds Bachelor’s degrees in Chemistry
and Psychology, in addition to a Master’s degree in Business
Administration, from the University of Minnesota.
About
Merit
Founded in 1987, Merit Medical Systems, Inc. is
engaged in the development, manufacture and distribution of
proprietary disposable medical devices used in interventional,
diagnostic and therapeutic procedures, particularly in cardiology,
radiology, oncology, critical care and endoscopy. Merit serves
client hospitals worldwide with a domestic and international sales
force and clinical support team totaling in excess of 300
individuals. Merit employs approximately 6,100 people worldwide
with facilities in South Jordan, Utah; Pearland, Texas; Richmond,
Virginia; Malvern, Pennsylvania; Rockland, Massachusetts; Aliso
Viejo, California; Maastricht and Venlo, The Netherlands; Paris,
France; Galway, Ireland; Beijing, China; Tijuana, Mexico;
Joinville, Brazil; Ontario, Canada; Melbourne, Australia; Tokyo,
Japan; Reading, United Kingdom; Johannesburg, South Africa; and
Singapore.
About Starboard Value
LP Starboard Value LP is a New York-based
investment adviser with a focused and differentiated fundamental
approach to investing primarily in publicly traded U.S. companies.
Starboard seeks to invest in deeply undervalued companies and
actively engage with management teams and boards of directors to
identify and execute on opportunities to unlock value for the
benefit of all shareholders.
Forward-Looking
Statements
Statements contained in this release which are
not purely historical, including, without limitation, statements
regarding the preparations for and outcome of the 2020 Annual
Meeting, actions which may be taken by Starboard and any response
from Merit, are forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 and are
subject to risks and uncertainties such as those described in
Merit’s Annual Report on Form 10-K for the year ended December 31,
2019, as amended by Merit’s Amendment No. 1 to Annual Report on
Form 10-K/A, filed with the SEC on April 29, 2020 (the “Form
10-K/A”), and subsequent filings with the SEC. Such risks and
uncertainties include inherent risks and uncertainties relating to
Merit’s internal models or the projections in this release; risks
and uncertainties associated with the COVID-19 pandemic; risks
relating to Merit’s potential inability to successfully manage
growth through acquisitions generally, including the inability to
effectively integrate acquired operations or products or
commercialize technology developed internally or acquired through
completed, proposed or future transactions; negative changes in
economic and industry conditions in the United States or other
countries; expenditures relating to research, development, testing
and regulatory approval or clearance of Merit’s products and risks
that such products may not be developed successfully or approved
for commercial use; governmental scrutiny and regulation of the
medical device industry, including governmental inquiries,
investigations and proceedings involving Merit; litigation and
other judicial proceedings affecting Merit; restrictions on Merit’s
liquidity or business operations resulting from its debt
agreements; infringement of Merit’s technology or the assertion
that Merit’s technology infringes the rights of other parties;
actions of activist shareholders; product recalls and product
liability claims; changes in customer purchasing patterns or the
mix of products Merit sells; risks and uncertainties associated
with Merit’s information technology systems, including the
potential for breaches of security and evolving regulations
regarding privacy and data protection; increases in the prices of
commodity components; the potential of fines, penalties or other
adverse consequences if Merit’s employees or agents violate the
U.S. Foreign Corrupt Practices Act or other laws or regulations;
laws and regulations targeting fraud and abuse in the healthcare
industry; potential for significant adverse changes in governing
regulations, including reforms to the procedures for approval or
clearance of Merit’s products by the U.S. Food & Drug
Administration or comparable regulatory authorities in other
jurisdictions; changes in tax laws and regulations in the United
States or other countries; termination or interruption of
relationships with Merit’s suppliers, or failure of such suppliers
to perform; fluctuations in exchange rates; uncertainties relating
to the LIBOR calculation method and the expected discontinuation of
LIBOR; concentration of a substantial portion of Merit’s revenues
among a few products and procedures; development of new products
and technology that could render Merit’s existing or future
products obsolete; market acceptance of new products; volatility in
the market price of Merit’s common stock; modification or
limitation of governmental or private insurance reimbursement
policies; changes in healthcare policies or markets related to
healthcare reform initiatives; failure to comply with applicable
environmental laws; changes in key personnel; work stoppage or
transportation risks; introduction of products in a timely fashion;
price and product competition; availability of labor and materials;
fluctuations in and obsolescence of inventory; and other factors
referenced in the Form 10-K/A, and other materials filed with the
SEC. All subsequent forward-looking statements attributable to
Merit or persons acting on its behalf are expressly qualified in
their entirety by these cautionary statements. Actual results will
likely differ, and may differ materially, from anticipated results.
Financial estimates are subject to change and are not intended to
be relied upon as predictions of future operating results, and
Merit assumes no obligation to update or disclose revisions to
those estimates.
Important Additional Information
and Where to Find It
Merit plans to file a proxy statement (the “2020
Proxy Statement”) with the SEC in connection with the solicitation
of proxies for the 2020 Annual Meeting, together with a proxy card.
SHAREHOLDERS ARE URGED TO READ THE 2020 PROXY STATEMENT (INCLUDING
ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT
DOCUMENTS THAT MERIT FILES WITH THE SEC CAREFULLY IN THEIR ENTIRETY
WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION.
Shareholders will be able to obtain, free of
charge, copies of the 2020 Proxy Statement, any amendments or
supplements thereto and any other documents (including a proxy
card) when filed by Merit with the SEC in connection with the 2020
Annual Meeting at the SEC’s website (http://www.sec.gov), at
Merit’s website (http://www.merit.com/investors) or by contacting
Innisfree M&A Incorporated by phone at (888) 750-5834, by email
at info@innisfreema.com or by mail at 501 Madison Avenue, 20th
Floor, New York, NY 10022.
Participants in the
Solicitation
Merit, its directors and certain of its
executive officers and employees may be deemed to be participants
in the solicitation of proxies from shareholders in connection with
the Annual Meeting. Additional information regarding the identity
of these potential participants, none of whom (other than Fred P.
Lampropoulos, Merit’s Chairman and Chief Executive Officer) owns in
excess of one percent (1%) of Merit’s shares, and their direct or
indirect interests, by security holdings or otherwise, will be set
forth in the 2020 Proxy Statement and other materials to be filed
with the SEC in connection with the Annual Meeting. Information
relating to the foregoing can also be found in the Form 10-K/A. To
the extent holdings of Merit’s securities by such potential
participants (or the identity of such participants) have changed
since the information printed in the Form 10-K/A, such information
has been or will be reflected on Statements of Ownership and Change
in Ownership on Forms 3 and 4 filed with the SEC.
Contacts
Anne-Marie WrightMerit Medical Systems,
Inc.Phone: (801) 208-4167
Media:Matthew
Sherman / Tim Lynch / Joseph SalaJoele Frank, Wilkinson Brimmer
KatcherPhone: (212) 355-4449
Investors:Arthur Crozier / Larry
MillerInnisfree M&A IncorporatedPhone: (212) 750-5833
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