New Prague medical device company deal solves boardroom drama
Electromed Inc., a small, publicly traded medical device company based in New Prague, spent the summer involved in a boardroom drama with a major investor.
On Monday, the company, which makes airway clearance devices, said it had signed a cooperation agreement, apparently resolving the issues out of court.
The other player is Denver-based Summers Value Partners, who, along with related funds, accumulated a 5.6% stake in Electromed in July and, as required, filed a document with the Securities and Exchange Commission revealing that he had become a major shareholder.
Summers Value Partners has been a shareholder since 2017 and has had discussions with management since. But a month after achieving major shareholder status, the investor, who specializes in “misunderstood and undervalued healthcare companies,” sent a letter to Electromed saying he would nominate four candidate directors. at the company’s annual meeting in November.
One of those candidates was Andrew Summers, the founder of Summers Value Partners.
Under the new cooperation agreement, Electromed has agreed to appoint two independent directors to the seven member board of Electromed. He will also form a new board finance and strategy committee and elect a new independent board chair after the November annual meeting.
“The Board of Directors, Summers Value Partners and management are all committed to maximizing shareholder value going forward,” said Kathleen Skarvan, President and CEO of Electromed, in an interview. “I believe that the cooperation agreement, and with the two new members of the board of directors who will be part of this [board] brush up on these additional skills and experience will be extremely valuable. “
The new candidates for the board are Kathy Tune and Joe Galatowitsch. Tune has worked with venture capital and private equity firms for 25 years. She has served on the board of directors of several health and healthcare technology companies and is currently COO, CFO and Chairman of the Board of Marani Health Inc., a maternal and health care company. Minneapolis-based developing fetal.
Galatowitsch has had a long career in managing healthcare companies, including leadership roles at 3M and Medtronic. Most recently, he worked for a global consulting firm that works with healthcare companies.
“We appreciate the constructive dialogue we have had with Electromed’s board of directors and management team and are confident that the changes announced today will help Electromed focus on the goal of improving value for all shareholders, ”Summers said in a press release. “With a renewed board of directors and a newly formed finance and strategy committee, we believe Electromed is ready for continued growth and value creation.”
According to the Summers Value Partners website, the company typically invests in a small portfolio of around 20 companies. Most are long-term investments in health-related companies, but they also take a handful of short positions. Investments are primarily in companies with market capitalization between $ 50 million and $ 1 billion.
Electromed’s Smart vest treats chronic lung problems in patients receiving HFCWO (high frequency chest wall oscillation) therapy. Its annual revenue was $ 36.8 million for its fiscal year ended June 30. Revenue increased 10.1% from a year earlier, but the company’s profits fell 43% to $ 2.3 million.
In a related announcement, two of Electromed’s current directors – Stephen Craney and George Winn, the company’s longest-serving member – have announced that they will not stand for re-election at the next annual meeting.
The newly constituted Board of Directors will continue to consist of seven members, four of whom are women. Tune will chair the new Finance and Strategy committee.
As part of the cooperation agreement, Summers Value Partners agreed to withdraw its candidates from the board of directors and accepted “usual standstill and voting commitments”.