Here's a situation that's become increasingly common in today's market: a company does solid, specialized work behind the scenes, but public investors struggle to figure out what it's really worth. Enter the activist investor with a simple message: maybe you shouldn't be public at all.

Activist firm Irenic Capital Management has taken a stake of more than 3% in Integer Holdings Corporation (ITGR), making it one of the medical device outsourcing company's largest shareholders. This week, Irenic sent a private letter to Integer's board laying out a familiar activist playbook: refresh the board, conduct a strategic review, and seriously consider selling the company.

The argument? Integer's shares are trading at a discount, and the public markets just aren't giving the business proper credit.

The Visibility Problem

Irenic's thesis centers on a pretty straightforward observation: Integer doesn't have obvious publicly traded peers. It's a contract manufacturer that partners with medical device companies to design, develop, and produce critical components for things like cardiac rhythm management devices, neuromodulation systems, and vascular applications. Important stuff, but not exactly easy to comp.

Without clear comparables, analyst coverage has been limited. Investor understanding suffers. And according to Irenic, that means the market has failed to properly assess Integer's earnings power and long-term prospects.

There's another wrinkle: confidentiality obligations with customers make it difficult for Integer to fully disclose what's in its pipeline. That's fine when you're private and dealing with a handful of sophisticated buyers who can get behind the curtain. But when you're a public company? It creates a credibility gap. Investors can't fully underwrite what they can't see, according to people familiar with the matter cited by the Wall Street Journal.

The result has been punishing. Integer's stock has fallen around 44% year to date, according to market data. For a company doing complex, high-value work in a growing sector, that's a tough pill to swallow.

Why Private Might Make Sense

Irenic believes Integer would be more attractive as a private company, where confidentiality concerns matter less and strategic buyers can dig deeper into the business without public disclosure requirements getting in the way. The firm has told Integer's board that it expects meaningful takeover interest from potential buyers, including private equity firms, at a substantial premium to the current share price.

That's not just wishful thinking. The medical device contract development and manufacturing sector has been hot for dealmaking in recent years, with transactions regularly commanding higher earnings and revenue multiples than what Integer currently trades at.

Recent Deal Activity Backs the Thesis

Consider the evidence. Earlier in December, Teleflex Incorporated (TFX) agreed to sell its Acute Care, Interventional Urology, and OEM businesses to Intersurgical Ltd and a consortium of Montagu and Kohlberg for $2.03 billion. That's serious money for contract manufacturing assets.

Then there's the Surmodics Inc. (SRDX) saga. In May 2024, private equity firm GTCR agreed to acquire the medical device coating company for approximately $627 million, or $43 per share. The deal hit a snag when the U.S. Federal Trade Commission and state regulators tried to block it, but in November, a federal judge in Illinois denied their request for a preliminary injunction, clearing the path for the takeover.

Both deals underscore the appetite for specialized medtech manufacturing assets, particularly among private equity buyers who can look past the public market's visibility issues.

The Fundamentals Aren't Broken

It's worth noting that Integer's underlying business isn't falling apart. The company reported third-quarter adjusted earnings of $1.79 per share, beating the consensus estimate of $1.68. Sales climbed 8% to $467.69 million, also ahead of the consensus forecast of $466.45 million.

So the operations are performing. The problem, in Irenic's view, is the structure. Public markets aren't rewarding Integer for what it does, and the constraints of being public may actually be holding the company back from showcasing its full potential.

That's the kind of setup activists love: good business, bad structure, clear path to value creation.

Price Action: Integer Holdings shares were up 5.68% at $78.34 at the time of publication on Thursday.