Timon Schneider | SOPA images | AP
Company: Integer Holdings Corp (ITGR)
Business: Integer Holdings Corporation is a contract development and manufacturing company for medical devices. Its brands include Greatbatch Medical and Lake Region Medical. The Company’s Cardio & Vascular product line offers a range of components, subassemblies and finished devices used in the areas of interventional cardiology, structural heart, heart failure, peripheral vascular, neurovascular procedures, interventional oncology, electrophysiology, vascular access, infusion therapy, hemodialysis, urology and gastroenterology. Its interventional cardiology portfolio focuses primarily on the design, development and manufacturing of catheter and wire-based technologies for the diagnosis and treatment of heart disease. Electrophysiology products include devices used by electrophysiologists and interventional cardiologists to treat cardiac arrhythmias such as atrial fibrillation.
Market value: $3.01 billion ($85.78 per share)
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Integer holdings in the last 12 months
Activist: Irenic Capital Management
Property: more than 3%
Average cost: n/a
Comment from activists: Irenic Capital was founded in October 2021 by Adam Katz, a former portfolio manager at Elliott Investment Management, and Andy Dodge, a former investment partner at Indaba Capital Management. Irenic invests in listed companies and works with company management. The company’s activism to date has focused primarily on strategic activism, recommending spinoffs and sales of companies.
What happens
On December 18, it was reported that Irenic had taken a stake of more than 3% in Integer Holdings and is calling for a board reshuffle and exploring a possible sale of the company.
Behind the scenes
Integer Holdings is a medical device contract development and manufacturing organization (“CDMO”). The Company serves as an outsourced design and development partner for original equipment manufacturers (“OEMs”) such as Medtronic, Boston Scientific and Johnson & Johnson. When developing new medical devices, OEMs typically outsource certain components to third parties, who are then responsible for those parts throughout the product’s lifecycle. Integer is the largest of these companies and the only publicly traded pure-play medical device CDMO. From an end market perspective, the company specializes in cardiovascular and neuromodulation applications, which are generally considered very high value due to their interventional and therefore very sticky nature. Additionally, the stringent regulatory and FDA approval requirements for these markets create very high barriers to change. But despite this strong market position and competitive advantage, the company’s share price has struggled, falling nearly 40% over the past year.
The catalyst for this downturn was Integer’s most recent quarterly report, which revealed that market demand for three specific products fell short of OEM expectations, resulting in OEMs significantly reducing their orders to Integer. As a result, Integer faces a growth gap from 2026 onwards. While the company typically targets organic growth of 6% to 8%, it is now forecast to grow between -2% and 2% in 2026. Despite assurances from management that it was merely a bubble and that growth would normalize in 2027, the stock plunged in extended trading and in the days that followed. Such a development, followed by management’s assurances, generally does not result in a 40% decline in a stock. The nature of Integer’s business imposes certain confidentiality restrictions on critical information. So while management can provide assurances, there can be no transparency about its pipeline or the identity of its customers, programs and platforms.
On December 18, it was reported that Irenic Capital holds a stake of more than 3% in Integer and is calling for a board reshuffle and exploring a possible sale of the company. There are a few reasons why selling here makes sense. First, as the only public pure-play medical device CDMO, Integer has no public compensation and suffers from limited understanding and coverage from investors and analysts. Secondly, as explained above, it is much easier to operate and develop a business in a private environment when there must be transparency about its sales and customers. Third, public investors have limited information with which to analyze the company, while a private buyer subject to a confidentiality agreement would be able to review Integer’s products, contracts and pipeline in detail and thus underwrite future growth with greater confidence. This is not lost with integer management. In 2024, they explored strategic alternatives and reportedly received offers at a premium to the then stock price (estimated in the range of $110 to $115 per share). Although the company ultimately did not pursue a deal as the stock was subsequently revalued, the recent decline in the share price suggests that the private equity stake is likely to remain at a significant premium to today’s valuation. For example, Teleflex Medical recently announced the sale of its OEM business at approximately 4.7x revenue and 16-17x EBITDA. Integer’s largest competitors, Resonetics and Confluent Medical, are both PE-owned and acquired at valuations exceeding 20x EBITDA. Extrapolating these multiples to Integer, which currently trades at about 2x revenue and 12x EBITDA, would equate to a takeover price of over $120 per share.
In evaluating this decision, Irenic would like to see a board reshuffle that would include directors with medical OEM experience and financial acumen. This would add the necessary experience in two areas that are essential to making a transformative decision, such as whether or not to sell. Even without a potential sale of the company, this is a board in need of a refresh. Of the 11 directors, five will have been on the board for at least 10 years by the next annual meeting. This includes Chairwoman Pamela Bailey, who has been on the board for almost 25 years. Introducing some new perspectives could significantly improve the board’s ability to evaluate the potential options to maximize shareholder value on a risk-adjusted basis.
Irenic has extensive experience in strategic activism, identifying companies struggling in the public markets and helping to implement spinoffs and sales of companies, often to private equity. Integer fits the company’s playbook perfectly. While we typically prefer to see an activist weigh a standalone thesis against a sales route, we’re hard-pressed to think of a company that has less justification for remaining on the public market. With the nomination period opening on January 21, Irenic’s next steps – and whether the company decides to nominate directors – are expected to be announced soon. Although Irenic is fully capable of conducting a proxy competition, the company has obtained board representation through settlements in the past, and we assume the company is seeking the same result here. Additionally, given Irenic’s strategic approach to its engagements, we would expect the company to de-emphasize its governance concerns should the current board initiate a formal strategic review and receive credible and value-added offers.
Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist assets.