Starboard Builds Stake in Merit Medical Systems

(Bloomberg) -- Activist investor Starboard Value has built a position in Merit Medical Systems Inc. and plans to meet with management to discuss ways to improve the performance of the device manufacturer, according to people familiar with the matter.

The New York-based hedge fund run by Jeff Smith has built a roughly 9% stake in the company and believes it’s undervalued, said the people, asking not to be identified because the matter is private. It’s unclear what sort of changes Starboard may push for.

Starboard confirmed the stake in a regulatory filing Monday. Representatives for Starboard and Merit Medical couldn’t be reached for comment.

Merit Medical, based in South Jordan, Utah, have fallen about 35% over the past year. It cut its financial guidance in July, blaming foreign exchange headwinds, changes in its product mix and its acquisition last year of BridgeWater Medical Inc.

The shares fell to their lowest point in three years in October after third-quarter results missed analysts’ expectations.

Shares in Merit Medical jumped as much as 17% in late trading on the news. They were trading up 11% to $38.50 a share as of 4:20 p.m. in New York, giving the company a market value of roughly $2.1 billion.

Merit Medical manufactures and markets disposable medical devices including catheters and stents used in cardiology, radiology, oncology and critical care, according to its website.

The health-care supply market has experienced consolidation in recent years. Becton Dickinson and Co. acquired C.R. Bard Inc. in 2017 for $24 billion while Teleflex Inc. acquired at least two companies in the space last year, according to data compiled by Bloomberg.

Merit Medical has at least two directors who have been on the board for more than 30 years: Chief Executive Officer and Chairman Fred Lampropoulos and Kent Stanger, the former chief financial officer. They founded the company in 1987, according to filings.

Another director, Franklin Miller, has been on the board for almost 15 years.

Long-serving board members can frequently become a target for activists when they make their case for why a company may be under-performing.

To contact the reporter on this story: Scott Deveau in New York at sdeveau2@bloomberg.net

To contact the editors responsible for this story: Liana Baker at lbaker75@bloomberg.net, Michael Hytha

©2020 Bloomberg L.P.