Electromed Inc., a small publicly traded medical device company based in New Prague, spent the summer embroiled in some boardroom drama with a major investor.
On Monday, the company, which makes airway clearing devices, said it had signed a cooperation agreement, apparently resolving the issues amicably.
The other player is Denver-based Summers Value Partners, which 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 it had become a major shareholder.
Summers Value Partners has been a shareholder since 2017 and has had conversations with management since. But a month after reaching major shareholder status, the investor, which specializes in "misunderstood and undervalued companies across the health care sector," sent a letter to Electromed saying it would nominate four director candidates 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 agreed to nominate two independent directors to Electromed's seven-member board of directors. It also will form a new Finance and Strategy Committee of the board and elect a new independent board chair after the annual meeting in November.
"The board, Summers Value Partners and management are all committed to maximizing shareholder value into the future," Kathleen Skarvan, president and chief executive of Electromed, said in an interview. "I believe the cooperation agreement, and with the two new board members that are going to be part of that [board] refresh with those additional skill sets and experience will be extremely valuable."
The new board nominees are Kathy Tune and Joe Galatowitsch. Tune has a 25-year history of working with venture capital and private equity firms. She has served on the boards of a number of health and health technology companies and is currently chief operating officer, chief financial officer and board chair of Marani Health Inc., a development stage maternal and fetal health company based in Minneapolis.
Galatowitsch has had a long career in management of health care companies including executive positions at 3M and Medtronic. He was most recently with a global consulting firm that works with health companies.
"We appreciate the constructive dialogue we have had with the Electromed board and management team and are confident that the changes announced today will help Electromed focus on the goal of enhancing value for all shareholders," Summers said in a news release. "With a refreshed board and newly formed Finance and Strategy Committee, we believe that Electromed is poised for continued growth and value creation."
According to website of Summers Value Partners, the firm generally invests in a small portfolio of about 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 capitalizations between $50 million and $1 billion.
Electromed's Smartvest devices treats chronic pulmonary issues in patients with HFCWO (high frequency chest wall oscillation) therapy. Its annual annual revenue was $36.8 million for its fiscal year ended June 30. Revenue increased 10.1% from the prior year, but the company's earnings dropped 43% to $2.3 million.
In a related announcement, two of Electromed's existing directors — Stephen Craney and George Winn, the company's longest-serving member — have announced they will not stand for re-election at the upcoming annual meeting.
The newly constituted board will continue to have seven members, four of them women. Tune will chair the newly formed Finance and Strategy committee.
As part of the cooperation agreement, Summers Value Partners agreed to withdraw its board nominees and agreed to "customary standstill and voting commitments."