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Company: Integer Holdings Corp (ITGR)
Business: Integer Holdings Corporation is a medical device contract development and manufacturing company. 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 interventional cardiology, structural heart, heart failure, peripheral vascular, neurovascular, interventional oncology, electrophysiology, vascular access, infusion therapy, hemodialysis, urology and gastroenterology procedures. Its interventional cardiology portfolio is focused primarily on the design, development and manufacture of catheter and wire-based technologies intended to diagnose and treat cardiac disease. Its electrophysiology products include devices used by electrophysiologists and interventional cardiologists for the treatment of cardiac arrythmias, such as atrial fibrillation.
Stock Market Value: $3.01B ($85.78 per share)
Integer Holdings in the past 12 months
Activist: Irenic Capital Management
Ownership: greater than 3%
Average Cost: n/a
Activist Commentary: 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 public companies and works collaboratively with firm leadership. The firm’s activism has thus far primarily focused on strategic activism, recommending spinoffs and sales of businesses.
What’s happening
On Dec. 18, it was reported that Irenic took a position of more than 3% in Integer Holdings and is calling for a board refreshment and the exploration of a potential sale of the company.
Behind the scenes
Integer Holdings is a medical device contract development and manufacturing organization (“CDMO”). The company acts 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 then become responsible for those parts for the entire lifecycle of the product. Integer is the largest of such 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 to be very high quality because of their interventional, and therefore highly sticky nature. Moreover, the stringent regulatory and FDA approval requirements for these markets create very high barriers to change. However, despite this strong market position and competitive moat, the company’s share price has struggled, down nearly 40% in the past year.
The catalyst for this downturn was Integer’s most recent quarterly report, which disclosed that the market demand for three specific products fell short of the OEM’s expectations, causing the OEMs to significantly reduce their orders from Integer. As a result, Integer is now facing an air pocket in growth from 2026. While the company typically targets 6% to 8% organic growth, 2026 is now projected to be between -2% and 2%. Despite management’s assurances that this is just an air pocket and that growth will normalize in 2027, the stock plummeted in extended trading and in the days that followed. A development like this followed by the assurances of management generally does not result in a 40% decline in a stock. The nature of Integer’s business brings along certain confidentiality constraints around critical information. So, while management can give assurances, they cannot give transparency into its pipeline or the identity of its customers, programs and platforms.
On Dec. 18, it was reported that Irenic Capital had a position of more than 3% in Integer and is calling for a board refreshment and to explore a potential sale of the company. There are a few reasons why a sale makes sense here. First, as the only public pure-play medical device CDMO, Integer has no public comps and suffers from limited investor and analyst understanding and coverage. Second, as discussed above when a company is required to have opacity around its sales and customers, it is much easier operated and grown in a private setting. Third, public investors have limited information with which to analyze the company, where a private buyer subject to a confidentiality agreement would be able to perform diligence on Integer’s products, contracts and pipeline in full detail, allowing them to underwrite future growth with greater confidence. This is not lost on Integer management. In 2024, they explored strategic alternatives and reportedly received bids at a premium to the share price at the time (estimated in the $110 to $115 per share range). While the company ultimately didn’t pursue a transaction, as the stock subsequently rerated, the recent share price pullback suggests that private equity interest should remain at a meaningful premium to today’s valuation. For example, Teleflex Medical recently announced the sale of its OEM business at approximately 4.7-times revenue and 16- to 17-times EBITDA. Integer’s largest competitors, Resonetics and Confluent Medical, are both PE owned and were acquired at valuations exceeding 20-times EBITDA. Extrapolating these multiples to Integer, which currently trades at roughly 2-times revenue and 12-times EBITDA, would equate to an acquisition price north of $120 per share.
In evaluating this decision, Irenic would like to see a board refreshment that would include directors with medical OEM experience and financial acumen. This would add needed experience in two areas integral in making a transformative decision like whether to sell or not. Even without a potential sale of the company, this is a board that needs refreshment. Of the 11 directors, five will have been on the board for at least 10 years by the next annual meeting. This includes the chair, Pamela Bailey, who has been on the board for nearly 25 years. Introducing some fresh perspectives could materially improve the board’s ability to assess the potential options to maximize value for shareholders on a risk-adjusted basis.
Irenic has significant experience in strategic activism, identifying companies that are struggling in the public markets and helping implement spinoffs and sales of businesses, often to private equity. Integer fits the firm’s playbook perfectly. While we typically prefer an activist to weigh a standalone thesis against a sale path, it is hard to recall a company with less justification for remaining in the public market. With the nomination deadline opening Jan.21, Irenic’s next steps – and whether the firm chooses to nominate directors – should emerge soon. However, while Irenic is more than capable of running a proxy contest, it has historically received board representation via settlements, and we would expect the firm to be looking for the same result here. Moreover, given Irenic’s strategically driven approach to its engagements, we would expect the firm to de-emphasize its governance concerns should the current board initiate a formal strategic review and receive credible and value accretive 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 investments.
