Medical technology company Masimo Corp. shares tumbled 35% Wednesday, to mark their biggest ever percentage decline, a day after the company announced its biggest ever deal, the acquisition of consumer tech company Sound United for about $1 billion. Sound United owns consumer audio brands including Bowers & Wilkins, Denon, Polk Audio and Marantz. The deal is expected to close mid-year and to be financed with a mix of cash on hand and borrowings under a new credit facility. Masimo said it would immediately boost adjusted per-share earnings upon close. “The Sound United transaction aligns with Masimo’s priorities, objectives and vision by advancing our strategy of enabling connected monitoring across both the hospital and home,” Chief Executive Joe Kiani said in a statement. Raymond James said the deal was likely a surprise for investors, coming as it announced mostly in-line earnings. “The deal has the potential to dilute the revenue growth and margin profile in the near-term, but it significantly accelerates MASI’s move into the home,” analyst Jayson Bedford wrote in a note.” While this is not a shift in strategy, most investors thought the transformation into the home would occur in a more graduated manner.” Bedford rates the stock at market perform. Needham analysts agreed. “We do not expect a positive reception from investors despite the EPS accretion and expect the accretion to be offset (or even more than offset) by multiple contraction and we maintain our Hold rating,” analysts led by Mike Matson wrote. Masimo shares have fallen 46% in the last 12 months, while the S&P 500 has gained 14%.
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