Medtronic makes two key additions to its board. How activist Elliott can build shareholder value

Company: Medtronic PLC (MDT)

Business: Medtronic PLC is an Ireland-based company, which provides health-care exertion solutions. The company's products class includes Advanced Surgical Technology; Cardiac Rhythm; Cardiovascular; Digestive & Gastrointestinal; Ear, Nose & Throat; General Surgery; Gynecological; Neurological; Oral & Maxillofacial; Patient Monitoring; Renal Care; Respiratory; Spinal & Orthopedic; Surgical Navigation & Imaging; Urological; Product Manuals; Product Ordering & Inquiries; and Product Performance & Advisories. Its products see Cardiac Implantable Electronic Device (CIED) Stabilization, Aortic Stent Graft Products, CareLink Personal Therapy Management Software, CareLink Pro Therapy Management Software. Its services and solutions see Ambulatory Surgery Center Resources, Care Management Services, Digital Connectivity Information Technology (IT) Support, Equipment Services and Support, Innovation Lab, Medtronic Healthcare Consulting, and Office-Based Sinus Surgery.

Stock Market Value: $118.78B ($92.71 per share)

Medtronic shares successful 2025

Activist: Elliott Investment Management

Ownership: n/a

Average Cost: n/a

Activist Commentary: Elliott is simply a precise palmy and astute activistic investor. The firm's squad includes analysts from starring tech backstage equity firms, engineers, operating partners – erstwhile exertion CEOs and COOs. When evaluating an investment, the steadfast besides hires specialty and wide absorption consultants, adept outgo analysts and manufacture specialists. Elliott often watches companies for galore years earlier investing and has an extended unchangeable of awesome committee candidates. The steadfast has historically focused connected strategical activism successful the exertion assemblage and has been precise palmy with that strategy. However, implicit the past respective years its activism radical has grown, and Elliott has been doing a batch much governance-oriented activism and creating worth from a committee level astatine a overmuch larger breadth of companies.

What's happening

On Aug. 19, Medtronic PLC announced the appointment of John Groetelaars (former interim CEO of Dentsply Sirona and erstwhile president and CEO of Hillrom) and Bill Jellison (former vice president, CFO of Stryker) to the committee pursuing engagement with Elliott. Further, the committee announced the formation of the Growth Committee and the Operating Committee. Jellison volition service connected both, portion Groetelaars volition articulation the Growth committee.

Behind the scenes

Medtronic is the largest medtech institution successful the satellite by revenue, with a past of medtech innovation and marketplace enactment dating backmost to the 1940s. While its cardiology conception remains its bequest halfway concern (37% of revenue), Medtronic is present a diversified operator, with its different segments including Neuroscience (29%), Medical Surgical (25% and mostly built from their acquisition of Covidien, which closed successful 2015) and Other (9%, chiefly diabetes treatment). Despite this positioning arsenic a one-stop store for aesculapian devices, Medtronic's banal terms has stagnated – appreciating conscionable 15% implicit the past decennary and down 8% successful the past 5 years.

This banal show underscores semipermanent capitalist vexation successful Medtronic's maturation profile. Investors person been agelong waiting for a maturation inflection owed to the company's charismatic extremity markets and scale, but Medtronic has been delivering underwhelming mid-single digit gross maturation for the past 10 years. Many person speculated that Medtronic's maturation has disappointed owed to its strategy of diversification. While Medtech peers similar Boston Scientific and Intuitive Surgical are pursuing extent alternatively than diversification, executing tuck-in merger and acquisitions, and gathering standard successful focused markets, Medtronic has sat connected the sidelines since the Covidien acquisition, leaving it with a larger – but slower increasing gross basal than peers.

However, for the archetypal clip successful galore years absorption is sending a connection to the marketplace that it not lone acknowledges this issue, but it's doing thing astir it. That connection comes successful the signifier of establishing a Growth Committee and adding arsenic a subordinate recently appointed manager Bill Jellison (former vice president and CFO of Stryker). Notably, these actions were taken pursuing engagement by Elliott. The Growth Committee is oriented towards portfolio management, including uncovering tuck-in M&A opportunities to supplement integrated growth, allocating probe and improvement much effectively, and reviewing its existing portfolio of businesses for inefficiencies to prosecute aboriginal plus sales. Jellison volition beryllium a value-added manager to that end. In addition, Elliott has shown that adjacent without a committee spot for an Elliott main it tin beryllium a invaluable progressive shareholder, peculiarly with evaluating and executing M&A opportunities.

Medtech has besides seen borderline challenges successful caller years and absorption is besides addressing that by forming an Operating Committee. This committee is focused connected creating country successful the P&L and gross borderline expansion. As is the lawsuit with astir MedTech businesses, Medtronic has been nether a batch of bottom-line unit since the Covid-19 pandemic. However, portion peers person mostly experienced 100 to 200 ground points of borderline pressure, Medtronic's gross margins (now astir 65%) person eroded astir 500 bps. This is different country wherever we person seen Elliott assistance portfolio companies arsenic an progressive shareholder.

While these 2 committees are new, they volition beryllium capable to commencement with a small momentum. Medtronic announced successful May that it volition beryllium spinning disconnected its diabetes concern wrong the adjacent 15 months, which should assistance the institution absorption connected its halfway businesses. There are besides 2 merchandise developments that could meaningfully lend to semipermanent growth: (i) PulseSelect, a pulse tract ablation strategy utilized to dainty atrial fibrillation, launched successful the U.S. successful 2024 and has grown rapidly implicit the people of this year; and (ii) Symplicity Spyral, a renal denervation merchandise utilized for the attraction of hypertension, precocious received a favorable reimbursement determination from the Centers for Medicare & Medicaid Services that's being finalized successful October, which should importantly summation entree and adoption of the product. While these merchandise developments are surely reasons to beryllium optimistic, much important to shareholders similar Elliott is simply a nonrecreational and blase process, and with these operational and governance changes, shareholders should beryllium assured that the institution yet has a process that tin present semipermanent growth. To paraphrase from the publication "Built to Last: Successful Habits of Visionary Companies," it is the quality betwixt being a clip teller and a timepiece builder. The astir palmy and enduring companies person been timepiece builders.

Elliott is 1 of today's astir prolific activistic investors, and it has already successfully completed the activistic signifier of this engagement. Now is the clip for signifier two: a turnaround of the business. Elliott has helped adhd 2 directors to the committee who are purpose-built for this situation. Both Jellison and Groetelaars person extended medtech experience, with Jellison having served connected the boards of 2 different medtech companies arsenic the effect of activistic engagement – Masimo for Politan Capital and Anika Therapeutics for Caligan Partners. What makes this engagement unsocial is that Elliott did not participate into immoderate ceremonial statement with Medtronic, signaling that absorption did not spot it arsenic indispensable and that Elliott is supportive of its efforts. While presently the signifier is acceptable for a semipermanent mutually beneficial narration betwixt the 2 parties, Elliott has enactment itself successful presumption to person unsocial flexibility should things not spell arsenic planned, but we bash not expect that they volition person to trust connected that contingency.

Ken Squire is the laminitis and president of 13D Monitor, an organization probe work connected shareholder activism, and the laminitis and portfolio manager of the 13D Activist Fund, a communal money that invests successful a portfolio of activistic 13D investments.