Four years ago, in February 2022, Masimo Corporation (Nasdaq: MASI) acquired the major audio company Sound United from Charlesbank Capital Partners in a transaction valued at $1.025 billion. That was a momentous time for Masimo and Sound United, which was about to embark on a crazy sequence of events that would see Masimo’s stock value crash, the company attempt to enter consumer health, the emergence of an activist investment group, a huge lawsuit ensue with Apple, a massive change in the governing Board, founder Joe Kiani quit (or was fired, depending on who you ask), a major cyberattack, and three years later, Sound United sold to Harman International Industries in a deal worth $350 million.
What was also momentous in February 2022 was that Strata-gee began its coverage of Masimo and took that wild and crazy ride along with them. But why am I writing about Masimo now? They’re back by popular demand…
Read all about the latest developments at Masimo…
After the deal closed, making Sound United part of Harman International Industries, a subsidiary of Samsung Electronics, it had always been my intention to cease Strata-gee’s coverage of Masimo, which is now just a pure play medtech company. After all, with Sound United now at Harman, I would be increasing my coverage there.
Masimo – A Buzz Began to Build
But then something strange began to happen. A new buzz began to build as news started to leak out that Masimo had been acquired by another larger – much larger – medtech company called Danaher Corporation. Strata-gee, of course, did not report this news as it had no direct connection to consumer electronics or custom integration industries. But I began to hear from Strata-gee readers…
First, one prominent industry executive reached out to me and asked if I had heard about the acquisition of Masimo. Even though I had not reported this news, I was aware of it and told him so. He went on to strongly encourage me to cover this news, as sort of an end-of-the-story of Masimo, a company previously reported on extensively by Strata-gee. I told him I had no plans to do so, but would consider it.
Then, I began to receive more contacts, emails, texts, phone calls, and messages about the Danaher acquisition of Masimo. What’s happening here? I asked many of those Strata-gee readers who reached out to me if they felt Strata-gee should cover the story? It was an honest question as this news was being well covered elsewhere – including by Donna Cusano’s well-written Telehealth &Telecare Aware website. All of them replied they would like to see Strata-gee’s version. Well, OK then…
So…here we go.
What Just Happened to Masimo?
Last week, Irvine, CA-based Masimo Corporation tentatively agreed to be acquired by Washington D.C.-based Danaher Corporation (NYSE: DHR), a much larger diversified medtech company with annual revenues of $24.5 billion (TTM) and a market cap of approximately $150 billion. For comparison, Masimo has annual revenues of a little over $2.0 billion and a market cap of around $9.4 billion. So Danaher is more than ten times larger than Masimo.
Danaher will acquire Masimo for $180/share in cash, valuing this deal at a total of about $9.9 billion. That price of $180 represents a nearly 40% premium to the approximately $130/share MASI stock was trading at just prior to the announced deal. That should put a smile on every Masimo investor’s face as this is a substantial upside return on the deal.
Both Companies’ Boards Have Signed Off on the Acquisition
The deal is contingent on receiving all necessary regulatory approvals. However, both boards of directors have “unanimously approved” the deal according to the formal announcement from Masimo. However, the deal still needs to be approved by Masimo stockholders.
Masimo will operate as a standalone business unit (and brand) within Danaher’s Diagnostics segment, which includes Radiometer, Leica Biosystems, Cepheid, and Beckman Coulter Diagnostics. Masimo will operate autonomously while strengthening Danaher’s offering in acute care settings.
Deal Works Out to 18x of 2027 EBITDA; Both Sides Celebrated the Deal
The Danaher official announcement notes that the purchase price works out to a transaction multiple of approximately 18x estimated 2027 EBITDA (a measure of profit), or 15x estimated EBITDA inclusive of the full benefit of expected annual synergies. That looks to be a pretty solid multiple.
The deal is expected to close in the second half of 2026. Both sides celebrated the deal…
We are excited to welcome the Masimo team to Danaher. We’ve followed this innovative company for many years and see it as an exceptional strategic fit for Danaher. Masimo is a leader in pulse oximetry and other patient monitoring solutions, which combined with its trusted brand and differentiated technology, will greatly strengthen our diagnostics franchise. With the Danaher Business System and our global scale, we see opportunities to expand Masimo’s reach and continue improving outcomes for patients, particularly those in acute care settings.
Rainer M. Blair, Danaher President and Chief Executive Officer
Both Sides Explain the Synergies of This Deal With Investors
Masimo’s advanced sensor technology and AI-enabled monitoring bring powerful new capabilities to our diagnostics portfolio. Integrating these strengths into Danaher will create meaningful opportunities to innovate for clinicians and improve decision making in critical settings.
Julie Sawyer Montgomery, Danaher Executive Vice President for Diagnostics
Remember when Masimo acquired Sound United? They made very little effort to explain why a medtech company was acquiring a premium audio company. We found out later that the then-CEO Kiani did have a plan for something he called hospital-to-home, but at the time of the actual acquisition, there was almost no information shared with investors, offering a vision of why the acquisition made sense. Consequently, investors sold off their stock, and the company lost significant market value.
Danaher – Expanding Direct Patient Monitoring; Masimo – An Opportunity to Expand Scale
Danaher is a global life sciences and diagnostics innovator, and this acquisition looks to provide a significant boost to its diagnostics unit by expanding its solutions for direct patient care. Between Masimo’s excellent technology and share of the pulse oximetry patient monitoring business and Danaher’s global market power, this move could allow these new partners to offer a meaningful challenge to rival Medtronic, one of the largest global medtech companies.
We look forward to joining Danaher and continuing our growth and momentum as the global leader in patient monitoring. Danaher shares our commitment to investing in talent and innovation and will be an ideal fit to help power the next chapter of Masimo. Importantly, becoming part of Danaher’s Diagnostics segment will strengthen our ability to scale our monitoring technologies globally and accelerate our mission of delivering Masimo innovations that empower clinicians to transform patient care.
Katie Szyman, Masimo Chief Executive Officer
Masimo Has Been Engaging with ‘Multiple Other Potential Partners’
This transaction represents a unique opportunity to deliver certain and premium value for Masimo’s shareholders, enhance outcomes for customers and patients, and provide compelling career growth paths for our employees across the world. The Board evaluated a broad range of opportunities over the past several months – which included pursuing our standalone strategy – and engaged with multiple other potential partners. Ultimately, it became evident that this transaction with Danaher was the most value-enhancing path for Masimo and all its stakeholders.
Michelle Brennan, Masimo Chairman of the Board
According to a report in Reuters, analysts were surprised by the announcement. J.P. Morgan analysts noted that investors had expected Danaher to target acquisitions closer to its core life-sciences and diagnostics businesses.
Danaher Says Masimo is ‘The Perfect Complement’ to Its Existing Business
However, Danaher argues that Masimo’s non-invasive pulse oximetry solutions offer the perfect complement to its existing lines, such as the invasive Radiometer blood analyzer devices. Masimo also brings high-technology, non-invasive monitors, such as brain function and respiration monitoring devices, among other products.
For investors, this development must feel like a storybook ending. Only a matter of months after successfully selling off Sound United to Harman, Masimo was acquired by Danaher in a relatively rich deal for investors. This is a storyline that many long-time Masimo stockholders couldn’t even imagine under Kiani, as the company’s stock value under previous management languished for years.
For Investors, A Storybook Ending
Investors can sell their shares for a quick, nearly 40% return, or they can stay the course for the next phase of the Masimo story. In announcing the transaction, both sides noted the strategic harmony between the parties – Danaher gets a leading pulse oximetry technology and line that dramatically powers up its diagnostic division’s offerings and gets them into the critical care business. And Masimo joins a global powerhouse that can help them quickly scale their international business, while being able to tap into Danaher’s deep resources.
However, Masimo remains embroiled in several legal battles, including some with former founder Joe Kiani, who is not going away quietly. Even though I recently reported that Masimo won a $634 million judgment against Apple, the tech giant has said it will appeal. Last time I checked, there were open cases in California, Delaware, and Washington, D.C. In many cases, these suits go both ways: i.e. Masimo v. Apple, Apple v. Masimo, Masimo v. Joe Kiani, Joe Kiani v. Masimo, Masimo v. USITC, Masimo v. Customs and Border Patrol, Masimo v. Joe Kiani and RTW Investments, and on and on…
Perhaps the Intensity Behind the Litigation Will Lessen
With a new owner of Masimo, the dynamics of this litigation may change. Clearly, there was some serious bad blood between Joe Kiani and Quentin Koffey of Politan Capital Management that fueled Kiani’s personal commitment to these battles. With Danaher as the new owner, perhaps lessening the ire behind the motive for litigation, that dynamic may shift to withdrawn actions, or settlements, or some other option. If not, these cases could continue on for years more.
So there you have it, Masimo is riding off into the sunset with new partner Danaher Corp. It looks to be a happy ending for all…
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