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HONG KONG - Investment firm Yunqi Capital, which holds a 5.1% stake in STAAR Surgical Company (NASDAQ:STAA), reiterated its opposition to the proposed $28 per share acquisition by Alcon Inc. (SIX/NYSE:ALC) in an open letter to shareholders on Monday. Alcon, a prominent player in the Healthcare Equipment & Supplies industry with a market capitalization of $38 billion and annual revenue of $10 billion, has seen its stock trading near its 52-week low of $73.22. According to InvestingPro data, Alcon maintains a strong financial health score and operates with moderate debt levels.
The Hong Kong-based firm argues that STAAR is significantly undervaluing its business potential, particularly in the Chinese market, and claims the current offer fails to reflect the company’s intrinsic value. This perspective aligns with current market analysis, as InvestingPro data shows Alcon trading at relatively high multiples with a P/E ratio of 35.59x and strong EBITDA of $2.34 billion, suggesting significant financial capacity for a higher offer.
Yunqi contends that STAAR’s recent performance challenges are temporary, primarily stemming from short-term distributor inventory adjustments in China rather than structural weaknesses. The firm noted that according to STAAR’s latest quarterly report, distributor inventory levels in China have returned to historical levels.
The investment firm also criticized incentives for STAAR’s CEO Stephen Farrell, claiming he stands to receive approximately $24 million in compensation from the merger despite only being appointed earlier this year.
"We believe these payouts reveal a significant conflict of interest, providing blinding financial incentives for Mr. Farrell to push for a sale," Yunqi stated in its letter.
Yunqi suggested that STAAR has multiple avenues to unlock shareholder value through operational improvements, including cost reductions that could potentially bring the company’s 2026 EBITDA run rate to up to $200 million, based on STAAR’s projection of $100 million in EBITDA forecasts. For deeper insights into both companies’ valuations and growth potential, investors can access comprehensive Pro Research Reports available on InvestingPro, which covers over 1,400 US equities with detailed financial analysis and expert insights.
The firm also highlighted that Alcon had previously offered $55 per share plus $7 per share in contingent value rights, significantly higher than the current offer.
Yunqi urged STAAR shareholders to vote against the proposed transaction at the upcoming special meeting, suggesting the company should instead initiate "a proper strategic alternatives process at the appropriate time and from a position of strength."
The letter follows similar opposition from Broadwood Partners, another STAAR shareholder, which released a presentation on October 2 titled "The Wrong Time, Wrong Process and Wrong Price."
This article is based on a press release statement from Yunqi Capital.
In other recent news, Broadwood Partners, holding 27.5% of STAAR Surgical Company, is urging shareholders to reject the proposed acquisition by Alcon Inc. for $28 per share. Broadwood expressed dissatisfaction with the offer, highlighting that a $58 per share proposal was declined by STAAR’s board last year. In an extensive presentation, Broadwood criticized the timing, process, and pricing of the merger, suggesting that STAAR’s current business challenges are temporary, with expectations of a return to growth and profitability. Meanwhile, Stifel has adjusted its price target for Alcon, reducing it to $85 from $90, yet maintaining a Buy rating. The firm indicated uncertainty about Alcon’s sales potential in the latter half of 2025, following a reduction in the company’s guidance. Additionally, Deutsche Bank has lowered its price target for Alcon to CHF69 from CHF80, maintaining a Hold rating due to concerns over market recovery visibility. These developments highlight the ongoing scrutiny and differing perspectives surrounding Alcon’s business and its proposed acquisition of STAAR Surgical.
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