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Activist investor nominates trio to HeartWare board to block Valtech buy

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The Cardioband for minimally invasive mitral valve repair--Courtesy of Valtech Cardio

Engaged Capital first voiced its opposition to the HeartWare ($HTWR) purchase of Valtech Cardio for about $930 million in cash and stock last October. Now, it's taking a step it had threatened earlier and nominated three board members. Success on that front would give the activist investor considerable leverage on the board, which currently is comprised of 8 members.

HeartWare's annual shareholder meeting typically is held in June, but the company noted that it will disclose this year's date within the "coming weeks." The Valtech acquisition, originally announced on Sept. 1, had been slated to close in late 2015. Shareholders have been enormously skeptical of the purchase, pushing HeartWare shares down by more than 40% since the deal was disclosed.

The miniaturized implantable heart pump maker hopes to add Valtech' s tangential, but related, technologies for surgical and transcatheter valve repair and replacement devices for mitral valve regurgitation and tricuspid valve regurgitation, the most common heart valve diseases. Mitral valve repair and replacement players large and small have seen a huge mobilization of strategic activity in the last year. But they are still in the development stage and have yet to reach the market.

In its latest open letter regarding the three board nominations, Engaged Capital reiterated its assessment of the "attractiveness of HeartWare's left ventricular device (LVAD) business and the unacceptable risks associated with the proposed acquisition of Valtech Cardio."

For its part, HeartWare acknowledged its receipt of Engaged Capital's board nominations and defended its rationale for the Valtech acquisition.

"The addition of Valtech's unique mitral and tricuspid repair and replacement platforms will position HeartWare for sustainable, long-term value on a larger scale than we believe could be achieved on a standalone basis," the company responded in a statement.

The trio nominated by Engaged Capital to the HeartWare board are Scott Ward, the chairman and interim CEO of Cardiovascular Systems and the former president of Medtronic's ($MDT) Cardiovascular business; Shawn McCormick, a former CFO of Tornier ($TRNX); and Brendan Springstubb, a senior analyst at Engaged Capital.

The firm held 1.3% of HeartWare as of Dec. 28 in the Framingham, MA-based company. HeartWare's current market cap of about $870 million has fallen below the original valuation of its cash-and-stock offer for Valtech. The company's shares fell 4% in early trading on Jan. 4.

- here is the latest Engaged Capital statement
- and the response from HeartWare

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