DEFC14A: Broadwood Urges STAAR Shareholders to Reject Alcon Merger

Broadwood Partners, STAAR Surgical's largest shareholder, is soliciting proxies to vote against the proposed $28 per share acquisition by Alcon, citing undervaluation and a flawed sale process.

Summary

• Broadwood Partners, holding approximately 27.5% of STAAR Surgical Company's common stock, opposes the proposed acquisition by Alcon Research, LLC for $28 per share.
• The Special Meeting for stockholders to vote on the merger is scheduled virtually for October 23, 2025, at 8:30 a.m. Pacific Time.
• Broadwood argues the Board conducted a deficient sale process, engaging meaningfully with only Alcon and failing to solicit interest from other potential buyers.
• The timing of the merger is considered suboptimal, as STAAR's stock was trading below its intrinsic value due to transitory issues like China inventory and tariffs, which are now largely resolved.
• Broadwood believes the $28 per share offer significantly undervalues STAAR, noting Alcon previously offered $55 per share cash plus a contingent value right worth approximately $7 per share in October 2024.
• Management projections indicate STAAR can achieve an Adjusted EBITDA margin greater than 30% by the end of 2027.
• Named executive officers are poised to receive approximately $55 million in compensation, with the CEO alone receiving about $24 million, due to equity awards vesting immediately upon merger at 160% of target levels.
• Broadwood urges stockholders to vote AGAINST both the Merger Agreement Proposal and the non-binding Compensation Proposal using the GREEN Proxy Card.

Sentiment

Score: 2

Explanation: The filing expresses strong negative sentiment towards the proposed merger, arguing it significantly undervalues the company and is the result of a flawed process. While positive about STAAR's standalone prospects, the overall tone of this specific filing is one of opposition and dissatisfaction with the current transaction.

Positives

• STAAR possesses superior and proprietary technology, specifically the EVO Implantable Collamer Lens (ICL), and has global scale.
• The company is well-positioned to capture a significant portion of the refractive surgery market and become a highly profitable enterprise.
• Near-term challenges related to inventory in China and tariffs are considered transitory and have been substantially resolved, with China revenue expected to normalize in H2 2025.
• STAAR has taken steps to reduce expenses and realign its leadership structure, positioning it for a return to sustainable growth and accelerated profitability.
• Recent clinical data suggests the advantages of STAAR's technology over laser refractive surgery (like LASIK) are greater than previously recognized, potentially accelerating market share gains.
• Management projects the company can achieve an Adjusted EBITDA margin of greater than 30% by the end of 2027, with margins continuing to expand thereafter.

Negatives

• The Board conducted a deficient sale process, engaging meaningfully with only Alcon and failing to solicit interest from other logical, well-capitalized potential buyers.
• The Board ignored strategic interest from two other parties ('Party A' and 'Party B') until hours before the Merger Agreement was signed, providing insufficient time for diligence or formal proposals.
• The timing of Alcon's approach was opportunistic, occurring when STAAR's stock was undervalued due to transitory issues and before market-moving news from an independent clinical trial comparing EVO ICL to LASIK.
• The proposed merger price of $28 per share significantly undervalues STAAR, representing an 18% discount to comparable medical technology companies based on consensus 2026E revenue (4.0x) and a 22% discount based on management's 2026P revenue (3.8x).
• Alcon's previous offer in October 2024 of $55 per share cash plus a contingent value right worth approximately $7 per share suggests a much higher intrinsic value for STAAR.
• The merger includes a 'windfall' for named executive officers, totaling approximately $55 million, with equity awards vesting immediately at 160% of target levels, despite the CEO having served only five months.

Risks

• The proposed merger price of $28 per share may not reflect the company's intrinsic value or future growth potential, leading to shareholders missing out on substantial long-term value.
• Approving the merger would prevent the company from realizing accelerated profitability and market share gains anticipated from resolved inventory issues, cost discipline, and superior technology.
• The immediate vesting of executive equity awards at 160% of target levels upon merger completion, without demonstrated performance merit, could be seen as a misallocation of shareholder value.

Future Outlook

Management projects STAAR Surgical Company can achieve an Adjusted EBITDA margin of greater than 30% by the end of 2027, with margins continuing to expand thereafter. The company expects China revenue to normalize in the second half of fiscal 2025 as distributors increase ICL purchases. Results from an independent, randomized clinical trial comparing EVO ICL outcomes to Alcon's LASIK platform are expected to be published soon, potentially having profound implications for competitive positioning and long-term growth.

Management Comments

• "[W]e have spent the past few months addressing the short-term tactical issues like channel inventory, cost discipline and tariffs, so that we can soon turn our complete focus to more strategic growth-oriented activities." (STAAR's Q1 2025 Earnings Call, May 7, 2025)
• "The level of inventory owned by our distributors in China has decreased substantially since December 27, 2024, and has now returned to historical levels. We expect our China revenue will normalize in the second half of fiscal 2025, as our distributors increase their purchases of ICLs to meet forecasted demand." (STAAR's Quarterly Report on Form 10-Q, August 6, 2025)
• "In the first half of 2025, we took a number of steps to change our leadership team, realign our leadership structure to better address market needs, reduce costs and discretionary spending, and better position the Company to return to sustainable growth. [That] restructuring effort was substantially completed as of June 27, 2025." (STAAR's Quarterly Report on Form 10-Q, August 6, 2025)
• "better days are ahead" (STAAR's CEO, Q1 2025 Earnings Call, May 7, 2025)

Industry Context

The ophthalmic surgical market is intensely competitive, with several global, well-capitalized companies marketing lasers for corneal refractive surgery, including LASIK. STAAR's EVO ICL technology competes directly with these, and recent clinical data suggests its advantages over LASIK are greater than previously recognized. The proposed merger would allow Alcon, a major player in the market, to capture a patient population not suitable for LASIK and increase its exposure to Asia, which accounts for approximately half of the global refractive market.

Comparison to Industry Standards

• The proposed merger price of $28 per share values STAAR at 4.0x consensus 2026E revenue, which is an 18% discount to comparable medical technology companies.
• Using management's forecasted 2026 net sales, the valuation is approximately 3.8x 2026P revenue, representing a 22% discount to comparable medical technology companies.
• Comparable medical technology companies include Alcon, Alphatec, AtriCure, Axogen, DexCom, Establishment Labs Holdings, Glaukos, Insulet, iRhythm, Penumbra, PROCEPT BioRobotics, TransMedics, Vericel, and Treace Medical Concepts.
• Alcon's previous offer in October 2024 of $55 per share cash plus a contingent value right (totaling approximately $62 per share) was significantly higher than the current $28 per share offer, suggesting a substantial undervaluation in the current proposal compared to prior market assessments.

Management Changes

Corporate Governance

Stakeholder Impact

• Shareholders: Broadwood argues the proposed merger significantly undervalues their investment, urging them to vote against it to protect long-term value.
• Executives: Named executive officers are set to receive substantial compensation (approx. $55 million total) due to immediate vesting of equity awards upon merger completion.
• Patients, Employees, Business Partners: Broadwood aims to ensure the company fulfills its promise to these stakeholders by continuing as an independent entity and realizing its growth potential.

Next Steps

• Stockholders are urged to vote AGAINST the Merger Agreement Proposal and the Compensation Proposal at the Special Meeting on October 23, 2025.
• Broadwood Partners is prepared to support the company with recruiting and nominating new directors and executives if the proposed merger is defeated.
• The results of an independent, randomized clinical trial comparing EVO ICL to LASIK are expected to be published soon, which could impact the company's competitive positioning and value.

Key Dates

Recommendation

The filing strongly argues that the proposed merger price of $28 per share significantly undervalues STAAR Surgical Company, especially given its strong future prospects, resolved transitory issues, and management's high EBITDA margin projections. Broadwood, as the largest shareholder, is actively campaigning against the sale, implying that shareholders should not sell their shares at the current offer price. Therefore, the recommendation is to 'hold' the stock, anticipating that the company's intrinsic value is higher and that a better outcome (either a higher offer or continued standalone growth) is achievable if the merger is rejected.

Keywords

STAAR Surgical Company, Alcon Research, Merger, Proxy Solicitation, Shareholder Vote, EVO ICL, Ophthalmic Surgery, Refractive Surgery, Undervaluation, Corporate Governance, Executive Compensation, Broadwood Partners