SCHEDULE: Yunqi Capital Rejects Revised Alcon Offer for STAAR Surgical

Yunqi Capital, a 5.1% shareholder, reiterates its opposition to Alcon's revised $30.75 per share offer for STAAR Surgical, citing an undervalued company and a flawed go-shop process.

Summary

• Yunqi Capital, a 5.1% shareholder of STAAR Surgical, continues to oppose the proposed acquisition by Alcon Inc., even at the revised offer price of $30.75 per share.
• Believes STAAR Surgical is not ripe for sale at this time, regardless of the go-shop outcome.
• Asserts that the company mismanaged the sale process from the start and that the 30-day go-shop period was structured to seal the Alcon deal rather than maximize shareholder value.
• Claims the company has not been fully transparent with shareholders, including in its most recent press release.
• Highlights that excess distributor inventory from 2023 is gradually normalizing, demand in China's refractive market is improving, and recent quarterly results show sequential operational momentum and cost discipline progress, indicating the business is turning a corner.
• Argues that the $30.75 offer, while representing a 74% premium to STAAR's 90-day volume-weighted average price (VWAP) and a 66% premium to the closing price on August 4, 2025, is insufficient when considering the company's long-term trajectory and temporary headwinds.

Sentiment

Score: 2

Explanation: The filing expresses strong negative sentiment regarding the proposed merger, the valuation, and the company's management of the sale process. Yunqi Capital is actively opposing the deal and believes the company is significantly undervalued.

Positives

• STAAR Surgical's business appears to be turning the corner with excess distributor inventory gradually normalizing.
• Demand indicators in China's refractive market have begun to improve following last year's slowdown.
• Recent quarterly results reflect sequential operational momentum and cost discipline progress.
• Solid and accelerating demand for ICL technology in China and globally.

Negatives

• The proposed merger significantly undervalues STAAR Surgical.
• A deficient process was conducted in relation to the Proposed Merger.
• Disagrees with the Issuer's bleak assessment of the macroeconomic climate in China.
• The go-shop process was structured and conducted to seal the Alcon deal, not to genuinely seek additional offers.
• The company has not been fully transparent with shareholders.
• The 30-day go-shop period was too short for a meaningful market check for a company with STAAR's global distribution, regulatory complexity, and manufacturing profile.
• Alcon was contractually entitled to receive all additional non-public information provided to any potential bidder within one business day and retained the ability to review any superior proposal for four business days, which likely discouraged alternative bidders.
• STAAR engaged with only 21 third parties, and only two signed NDAs, with at least one credible buyer reportedly told to sign a multi-year standstill to access diligence materials.
• The Board's composition would benefit from additional stockholder perspective.

Risks

• The proposed merger may not maximize shareholder value due to an allegedly deficient process and undervaluation.
• The go-shop process was potentially flawed, discouraging alternative bidders and limiting the potential for a superior offer.
• The Board's current actions and perceived lack of transparency could lead to shareholder dissatisfaction and potential future proxy contests.
• The company's long-term trajectory and recovery from temporary headwinds might be cut short by an untimely sale.

Future Outlook

Yunqi Capital intends to review its investment in STAAR Surgical on a continuing basis, considering factors like the Issuer's financial position, merger terms, potential superior offers, share price levels, market conditions, and economic/industry conditions. They may contact management, the Board, other stockholders, and potential strategic partners to explore alternatives for creating additional stockholder value. They also reserve the right to request a special meeting to remove certain sitting directors, though they do not currently intend to solicit proxies for such a meeting or engage in a control transaction or contested solicitation for director election.

Management Comments

• "We strongly believe that it is still not the right time to sell the Company – regardless of the outcome of the go-shop period."
• "We also believe that STAAR has mismanaged its attempt to sell the Company from the start; that the go-shop process was structured and conducted to seal the Alcon deal rather than to genuinely seek additional offers; and that the Company has not been fully transparent with shareholders, including in its most recent press release."
• "There may come a time when a board of STAAR should sell the Company, but now is not the right time, and the current Board is not the right board for the job, having lost credibility with shareholders in our view."
• "We are a long-term shareholder in STAAR, with a 5.1% stake and a wealth of insight on the Company’s business and long-term prospects, and we are speaking out against Alcon’s attempted takeover of the Company for less than fair value."
• "We opposed it because STAAR is at a strategic inflection and rebound point."
• "If STAAR’s Board had been committed to seeking fair value and maximizing shareholder value, it would have allowed the current agreement to terminate and, at the appropriate time and from a position of strength, initiated a disciplined strategic alternatives review with a full market canvass – rather than a constrained process that favored Alcon."
• "We will continue to vote our shares AGAINST the amended merger agreement and urge all shareholders to do the same."
• "The Board’s composition would benefit from additional stockholder perspective and that the chief investment officer of Yunqi Capital Limited, Christopher M. Wang, would be pleased to serve on the Board to provide this perspective and would welcome conversations with the Board to that end."

Industry Context

The filing highlights the dynamics of M&A in the medical device industry, specifically ophthalmology, where a larger player (Alcon) is attempting to acquire a specialized company (STAAR Surgical). It also touches upon the impact of macroeconomic conditions in key markets like China on company valuations and strategic decisions. The activist stance by Yunqi Capital reflects a broader trend of shareholders challenging board decisions in M&A transactions, particularly when they perceive undervaluation or a flawed process.

Comparison to Industry Standards

• Yunqi Capital argues that a 30-day go-shop period is too short for a meaningful market check for a company with STAAR's global distribution, regulatory complexity, and manufacturing profile, implying it falls short of what would be considered a robust process in M&A.
• The contractual provisions allowing Alcon to receive non-public information and review superior proposals are presented as deterrents to alternative bidders, suggesting they deviate from a truly competitive bidding environment.
• The reported imposition of multi-year standstills in NDAs for potential bidders is criticized as a restrictive demand that may have deterred credible parties, contrasting with standard practices aimed at encouraging diligence.
• Yunqi Capital's assertion that Alcon itself assigned a valuation roughly double the current offer less than a year ago implies a significant discrepancy compared to prior internal assessments or industry benchmarks.

Management Changes

Corporate Governance

Stakeholder Impact

• Shareholders: Yunqi Capital's primary concern is maximizing shareholder value, arguing the current merger undervalues the company and the process was flawed. Their actions aim to protect and enhance shareholder returns.
• Management/Board: The filing directly criticizes the Board's credibility and management's handling of the sale process, potentially increasing pressure on them.
• Alcon Inc.: The continued opposition from a significant shareholder creates uncertainty for Alcon's acquisition plans.

Next Steps

• Yunqi Capital will continue to review its investment in STAAR Surgical.
• They may contact STAAR's management, Board, other significant stockholders, and potential alternative strategic and financial partners.
• They may, in the future, request that the Issuer call a special meeting of stockholders to vote on the removal of certain sitting directors.
• They reserve the right to effect transactions in STAAR shares in open-market or privately negotiated transactions.
• Yunqi Capital will continue to vote its shares AGAINST the amended merger agreement and urges other shareholders to do the same.

Key Dates

Recommendation

Yunqi Capital, a significant long-term shareholder, strongly believes STAAR Surgical is undervalued by the current Alcon offer and that the company is at an "inflection and rebound point." They are actively voting against the merger and urging other shareholders to do the same, implying that holding the stock for future appreciation or a better offer is the preferred strategy over accepting the current acquisition price. Their stance suggests the company's intrinsic value is higher than the proposed $30.75 per share.

Keywords

STAAR Surgical, Alcon Inc., Merger Agreement, Yunqi Capital, Shareholder Activism, Go-Shop Period, Valuation, Proxy Solicitation, Common Stock, Ophthalmology, ICL Technology, China Market