DEFA14A: STAAR Surgical Defends Alcon Merger Amid Broadwood Claims

STAAR Surgical Company issued a statement refuting Broadwood Partners' claims, urging stockholders to vote for the Alcon merger, citing a significant premium and challenging business headwinds.

Summary

• STAAR Surgical is defending its agreement to merge with Alcon for $28 per share in cash, refuting claims made by activist investor Broadwood Partners.
• The company highlights that the Alcon offer represents a 59% premium to its 90-day Volume Weighted Average Price (VWAP) and a 51% premium to its closing price on August 4, 2025.
• STAAR's Board of Directors unanimously recommends stockholders vote FOR the merger, emphasizing it is in the best interests of stockholders.
• STAAR refutes Broadwood's allegations regarding the buyer landscape, management projections, Board independence, negotiation timeline, and valuation.
• The company acknowledges significant business challenges, including a downward trajectory in consolidated net sales since 2023 and a 55% decrease in net sales in Q2 2025, resulting in a $16.8 million net loss.
• STAAR projects a 10% annual net sales growth rate from 2026 through 2030, a significant reduction from its historical 20% growth rate and 25% CAGR from 2020-2023.
• The merger is anticipated to close within six to 12 months of the initial agreement announcement on August 5, 2025, subject to regulatory and stockholder approval.
• A virtual Special Meeting of Stockholders is scheduled for October 23, 2025, at 8:30 a.m. (Pacific Time) to vote on the merger.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to the significant premium offered by the Alcon merger, which the Board unanimously recommends. However, this positive is tempered by the company's explicit acknowledgment of substantial and worsening business headwinds, declining sales, and increased competition, which are the underlying reasons for accepting the offer.

Positives

• The Alcon merger offers a 59% premium to STAAR's 90-day VWAP and a 51% premium to the closing price on August 4, 2025.
• The offer represents a 47% premium to the median sell-side analyst price target of $19.00 per share prior to the announcement.
• The premium paid is approximately 2.0x the median premium in comparable MedTech transactions.
• The Board conducted an extensive review of strategic alternatives for over a year prior to the agreement.
• Management has been effective in reducing selling, general, and administrative expenses and improving gross margin.

Negatives

• Consolidated net sales have been on a downward trajectory since 2023.
• Net sales decreased 55% in the second quarter of 2025, and STAAR reported a net loss of $16.8 million.
• STAAR's business in China, which represented 51% of consolidated net sales last year, is facing headwinds.
• Net sales growth has slowed significantly, with a projected three-year CAGR of 2% from 2023 to 2026 ($322 million to $340 million).
• STAAR's long-term prospects have changed due to increased competition in China and other factors.
• The company's growth profile changed from a 12.8% two-year CAGR (Q2 2022 to Q2 2024) to a NEGATIVE 14.3% two-year CAGR (Q2 2023 to Q2 2025).
• Projected net sales growth from 2026 to 2030 is 10% annually, sharply down from the 25% CAGR from 2020 to 2023.
• STAAR is a single-product company facing new risks, justifying a higher discount rate for valuation.
• The leading EVO ICL product is vulnerable due to new and emerging competitors, which will pressure growth and pricing.

Risks

• Failure to obtain approval of the proposed transaction from STAAR's stockholders.
• Failure to obtain required regulatory approvals or satisfy other closing conditions for the merger.
• Disruption of management's attention from ongoing business operations due to the proposed transaction.
• Impact of the merger announcement on STAAR's ability to retain and hire key personnel and maintain relationships with customers, suppliers, and others.
• Inability to meet expectations regarding the timing and completion of the transaction.
• Outcome of any legal proceedings that may be instituted against STAAR related to the proposed transaction.
• Significant decline in STAAR's stock price if the proposed transaction is not consummated.
• Challenges in STAAR's business in China, which represented 51% of consolidated net sales last year.
• Slowing net sales growth and increased competition, particularly for the EVO ICL product.
• Uncertainty regarding tariff mitigation beyond early next year.

Future Outlook

Management projects a 10% annual net sales growth rate from 2026 through 2030, acknowledging that while better days are ahead with a return to growth, it will not be as robust as historical rates. The company expects to have substantially mitigated tariff risk through the end of the current year and early next year, but predictability beyond that period is difficult.

Management Comments

• We are strong believers in the EVO ICL technology and stand behind our plan for STAAR to grow net sales by 10% annually from 2026 through 2030, but we cannot ignore the challenges that STAAR faces.
• It is not hard to see from STAARs reported results that the Companys business in China, which represented 51% of consolidated net sales last year, is facing headwinds.
• Management presented optimistic projections to Alcon to extract the highest possible value in the negotiation, which is in the best interests of STAAR stockholders.
• Sharing more bullish projections with a buyer is a standard practice in the context of a sale negotiation, and it fully aligns with the objective of maximizing value for stockholders.
• Management also prepared projections that reflected a modestly lower view of the future growth profile of STAAR, which was approved by the STAAR Board for use in the fairness opinion prepared by the Boards financial advisor.
• Management continues to expect that better days are ahead. Net sales were down by more than 50% in the first half of 2025. STAAR expects to return to growth and therefore better days are ahead, but that does not mean expected future growth will be as robust as in the past.
• Management continues to believe that weve substantially mitigated the tariff risk because weve got inventory in market that is going to get us through the end of this year, early next (year). What happens beyond early next (year) is more difficult to predict.
• Management commentary that we operate in a very large and growing market, so we will generally enjoy tailwinds was and continues to be a valid expectation. Management projections for 10% net sales growth from 2026 to 2030 support a tailwind, but this does not suggest STAAR will revert to its 25% historical growth rate from 2020 to 2023.
• Management commentary that it is very confident in the long run of the business was and continues to be a reasonable expectation, which is why management projected 10% net sales growth from 2026 to 2030. At the same time, it is impossible to ignore the challenges that have decreased net sales each year since 2023.

Industry Context

STAAR Surgical operates in the ophthalmic surgery market, specializing in phakic IOLs with its EVO ICL technology. The company acknowledges heightened competitive risks and structural challenges, including slowing net sales growth and increased competition, which are impacting its leading product. The proposed merger with Alcon, a major player in eye care, reflects a consolidation trend or strategic acquisition in a competitive MedTech segment where innovation and market share are crucial.

Comparison to Industry Standards

• The Alcon transaction provides a premium of approximately 2.0x the median premium paid in comparable MedTech transactions, indicating a favorable offer relative to industry benchmarks for acquisitions.
• The filing does not name specific comparable companies or projects for direct performance comparison, but it implicitly compares its growth trajectory to historical performance and industry growth rates.

Legal Proceedings

• The outcome of any legal proceedings that may be instituted against STAAR related to the proposed transaction.

Stakeholder Impact

• Shareholders: Will receive a premium cash value of $28 per share if the merger is approved, providing certainty amidst declining performance and future risks.
• Employees: Potential disruption due to the proposed transaction, including retention and hiring challenges.
• Customers, Suppliers, and Others: Potential impact on relationships due to the announcement of the proposed transaction.

Next Steps

• STAAR stockholders to vote FOR the Alcon merger on the WHITE proxy card.
• Virtual Special Meeting of Stockholders on October 23, 2025, at 8:30 a.m. (Pacific Time) to vote on the merger.
• Completion of the merger, subject to customary closing conditions, including regulatory approval and stockholder approval.
• Realization of merger benefits for all stakeholders.

Key Dates

Recommendation

The STAAR Board of Directors unanimously recommends that all STAAR stockholders vote FOR the Alcon merger, which offers a compelling cash premium of $28 per share. Given the acknowledged significant business headwinds, declining sales, increased competition, and a projected lower growth rate compared to historical performance, accepting this premium cash offer provides certainty and mitigates future risks for stockholders. The recommendation to vote 'FOR' the merger is effectively a recommendation to 'sell' shares to Alcon at the agreed price.

Keywords

STAAR Surgical, Alcon, Merger, Acquisition, EVO ICL, Phakic IOLs, Vision Correction, Ophthalmology, SEC Filing, Proxy Statement, Broadwood Partners, Shareholder Vote, STAA, MedTech