ISS Recommends STAAR Shareholders Approve Alcon Merger
The proxy advisory firm reversed its earlier stance after Alcon increased its offer to $1.65 billion, though key shareholders remain opposed.
STAAR Surgical Company’s (NASDAQ: STAA) proposed merger with eye care giant Alcon (NYSE: ALC) has gained a critical endorsement, significantly boosting the deal’s prospects. Influential proxy advisory firm Institutional Shareholder Services (ISS) has recommended that STAAR stockholders vote in favor of the sweetened acquisition offer, a pivotal reversal from its initial opposition just two months prior.
The endorsement provides crucial momentum for a deal that has faced hurdles, including vocal opposition from major investors. The path to the merger cleared considerably after Alcon raised its offer by 10% in early December, valuing the implantable lens maker at approximately $1.65 billion, or $30.75 per share.
In its updated report, ISS noted that the revised terms and more acute downside risks for STAAR as a standalone entity now outweighed previous concerns about the company’s valuation. This marks a significant turnaround from October, when ISS advised against the deal, citing “deficiencies, disconnects, and uncertainties” surrounding the initial $1.5 billion offer. STAAR's board is now actively urging shareholders to approve the transaction.
Despite the positive recommendation from ISS, the deal is not without its dissenters. Broadwood Partners, which holds a significant stake in STAAR, has maintained its opposition. The activist investor argues that even the improved offer substantially undervalues the company and has criticized the sale process. Broadwood has stated its intention to vote against the revised transaction, asserting that STAAR has a bright future as an independent entity, particularly with what it sees as improving demand in the key Chinese market.
STAAR Surgical, with a market capitalization of approximately $1.19 billion, specializes in implantable lenses for vision correction. However, the company has faced headwinds, reporting negative earnings per share of -$1.96 and a year-over-year decline in quarterly earnings. In a press release announcing the ISS recommendation, STAAR’s board highlighted these challenges, including its significant exposure to China and a limited product offering, as reasons why the certainty of a cash premium from Alcon is the best path for shareholders.
For Alcon, a global leader in eye care with a market capitalization of nearly $39 billion, the acquisition of STAAR would bolster its portfolio of ophthalmic products. Analysts see the deal as a strategic move for Alcon to expand its presence in the refractive surgery market. Prior to the merger talks, the median sell-side analyst price target for STAAR was around $19.00 per share, significantly below Alcon's current offer.
The final decision now rests with STAAR’s stockholders, who will weigh the certainty of a premium cash offer against the potential future growth of a standalone company. The upcoming shareholder vote will determine the next chapter for the innovative lens maker, deciding whether it joins forces with an industry titan or continues on its own path amid a challenging market.