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Company: Integer Holdings Corp (ITGR)
Business: Whole holding company is a medical device contract development and manufacturing company. Its brands include Greatbatch Medical and Lake Region Medical. The Company’s cardiovascular 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, interventional procedures, electrophysiology, vascular access, infusion therapy, hemodialysis, urology and gastroenterology. Its interventional cardiology portfolio primarily focuses on the design, development and manufacturing of catheter and wire-based technologies for the diagnosis and treatment of heart diseases. Its electrophysiology products include devices used by electrophysiologists and interventional cardiologists for the treatment of cardiac arrhythmias, such as atrial fibrillation.
Market value: $3.01 billion ($85.78 per share)
Whole number of titles in the last 12 months
Activist: Irenic Capital Management
Possession: greater than 3%
Average cost: n / A
Comment from an activist: Irenic Capital was founded in October 2021 by Adam Katz, former portfolio manager at Elliott Investment Management, and Andy Dodge, former investment partner at Indaba Capital Management. Irenic invests in public companies and works collaboratively with business leaders. So far, the firm’s activism has primarily focused on strategic activism, recommending company splits and sales.
What is happening
On December 18, it was reported that Irenic had taken a position of more than 3% in Integer Holdings and was calling for a board refresh and 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 these companies and the only purely publicly traded medical device CDMO. From an end market perspective, the company specializes in cardiovascular and neuromodulation applications, which are generally considered very high quality due to their interventional, and therefore very sticky, nature. Additionally, the strict regulatory and FDA approval requirements for these markets create very significant barriers to change. However, despite this strong market position and competitive advantage, the company’s stock price has struggled, falling almost 40% over the past year.
The catalyst for this slowdown was Integer’s most recent quarterly report, which revealed that market demand for three specific products failed to meet OEMs’ expectations, causing OEMs to significantly reduce their orders from Integer. As a result, Integer is now facing a growth gap starting in 2026. While the company typically targets 6-8% organic growth, it is now expected to be between -2-2% in 2026. Despite management’s assurances that this is just a gap and that growth will normalize in 2027, the stock fell during extended trading and in the days that followed. followed. Such a development followed by management assurances does not generally result in a 40% drop in a stock. The nature of Integer’s business results in certain confidentiality constraints around critical information. So while management can provide assurances, it cannot provide transparency about its pipeline or the identity of its customers, programs and platforms.
On December 18, it was reported that Irenic Capital held a position of more than 3% in Integer and was requesting a board refresh and exploring a potential sale of the company. There are several reasons why a sale makes sense here. First, as the only public CDMO dedicated to medical devices, Integer does not have a public company and suffers from limited investor and analyst understanding and coverage. Second, as noted above, when a business must be opaque about its sales and customers, it is much easier to manage and grow in a private setting. Third, public investors have limited information to analyze the company, whereas a private buyer subject to a confidentiality agreement would be able to conduct a thorough due diligence on Integer’s products, contracts and pipeline, allowing them to pursue future growth with greater confidence. This is not lost on Integer management. In 2024, they explored strategic alternatives and reportedly received offers at a price higher than the stock price at the time (estimated at $110-$115 per share). Although the company ultimately did not proceed with a transaction, as the stock was subsequently revalued, the recent share price decline suggests that the private equity stake is likely to remain at a significant premium to the current valuation. For example, Teleflex Medical recently announced the sale of its OEM business for approximately 4.7 times higher revenue and 16 to 17 times higher EBITDA. Integer’s main competitors, Resonetics and Confluent Medical, are both owned by private equity firms and were acquired at a valuation in excess of 20 times EBITDA. Extrapolating these multiples to Integer, which currently trades at around 2x revenue and 12x EBITDA, would equate to an acquisition price in excess of $120 per share.
In evaluating this move, Irenic would like to see a refreshed board that would include directors with OEM medical experience and financial acumen. This would add the necessary experience in two areas 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 that needs refreshing. Of the 11 directors, five will have been on the board for at least 10 years by the next annual meeting. This includes President Pamela Bailey, who has served on the board for nearly 25 years. Introducing new perspectives could significantly improve the board’s ability to evaluate potential options to maximize shareholder value on a risk-adjusted basis.
Irenic has significant experience in strategic activism, identifying struggling companies in the public markets and helping to implement company spin-offs and sales, often to private equity. Integer fits the company’s playbook perfectly. While we generally prefer an activist to weigh an independent thesis versus a sales path, it’s difficult to recall a company that would have less reason to stay on the public market. With the nomination deadline opening on January 21, Irenic’s next steps – and whether the firm chooses to appoint directors – are likely to emerge soon. However, even though Irenic is more than capable of leading a proxy fight, she has always been represented on the board through bylaws, and we expect the company to seek the same result here. Additionally, given Irenic’s strategic approach to its engagements, we expect the company to mitigate its governance concerns if the current board initiates a formal strategic review and receives credible, value-creating 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.
