Broadwood files definitive proxy, STAAR reaffirms Alcon merger

Investing.com -- The fight between STAAR Surgical Company (NASDAQ:STAA) and its largest shareholder Broadwood Partners moved into a sharper phase last week as Broadwood filed its long-awaited definitive proxy statement and STAAR responded with a new investor presentation and statement to Investing.com.

Broadwood, which holds roughly 27.5% of STAAR’s shares and has been invested for three decades, again pressed its opposition to STAAR’s pending acquisition by Alcon AG (NYSE:ALC). The hedge fund reiterated four core objections, including alleged conflicts of interest and concerns about STAAR’s sale process, while sharpening its criticism of STAAR’s strategic direction.

STAAR’s board countered by reaffirming its support for the Alcon deal, pointing to sustained competitive and geographic risks as a standalone company, and highlighting the premium Alcon’s offer represents to shareholders. In its presentation, STAAR also disclosed that its second-largest active shareholder, Soleus Capital Master Fund L.P., which owns about 6% of the company’s stock, has informed the board it supports the merger and intends to vote in favor absent a material change in circumstances, a notable counterweight to Broadwood’s opposition. 

STAAR Surgical develops and manufactures implantable lenses used to correct vision problems such as myopia and astigmatism, and sells them worldwide, with its EVO Implantable Collamer Lens (ICL) as its flagship product. Alcon, a Swiss-based eye-care giant spun off from Novartis in 2019, is one of the largest manufacturers of lasers used for LASIK, intraocular lenses, and vision care products globally.

Broadwood’s Definitive Proxy: Timing, Process, and Conflicts at the Center

In its definitive proxy, Broadwood sharpened and expanded arguments it has made since the hedge fund came out against the deal in early September, centering on what it calls “inopportune timing,” a “flawed process,” a “conflicted board,” and “a suboptimal transaction.”

Inopportune Timing:
Broadwood argues STAAR’s board is selling at the worst possible moment. After macro headwinds and management missteps in China caused temporary revenue declines, Broadwood says STAAR is now positioned for a rebound in growth and profitability, a turnaround reflected in second-quarter results and management projections disclosed only after the merger announcement. With nearly $200 million in cash, no debt, leading technology with STAAR’s EVO ICL, and an expanding market, Broadwood says there was “no imperative” to sell before the company could realize its “immense potential.” Additionally, an independent trial comparing STAAR’s implantable lenses and LASIK is set to come out shortly, one that Broadwood argues could boost STAAR’s valuation. 

STAAR’s board insists the Alcon deal was struck with a clear-eyed view of the company’s prospects, not in panic. While second-quarter results showed some operational improvements, the company points out that net sales were still down more than 50% year over year and that China’s recovery remains uneven. STAAR says there is no hidden “market-moving” clinical study in the pipeline, only an investigator-initiated trial comparing patient experience, not clinical outcomes, undercutting Broadwood’s suggestion that a major inflection point was imminent.

A Flawed Process:
Broadwood contends the board ran a hasty, narrow sale process that gave Alcon a privileged position while failing to proactively solicit other bidders. According to the filing, Alcon was the only party granted diligence access or management meetings, even though at least two other potential buyers had informally approached unconflicted board members. The firm notes Alcon itself floated a $62-per-share offer less than a year ago and argues STAAR’s improved fundamentals since then should have driven a higher price, if the process had created real competition. Broadwood calls the “window shop” period a “fig leaf” of fiduciary duty that rarely yields true alternative bids.

STAAR rejects the portrayal of a rushed, one-sided sale. The company says its board and management have long-standing knowledge of potential buyers and undertook an extensive review of options, including remaining independent. It negotiated what it calls an “aggressive” merger agreement that included a 45-day post-signing “window shop” provision to allow rival bidders to emerge. STAAR says no firm proposals came in during that period; the two “interested” parties Broadwood cites sent only vague e-mails and never advanced even after follow-ups from STAAR’s CEO. By contrast, Broadwood calls the window shop a fig leaf; STAAR says it was an open invitation.

A Conflicted Board and Management Team:
Broadwood again raised concerns about the board’s ties to Alcon, pointing out that STAAR’s chair maintained a seven-year paid consulting relationship with Alcon at the time merger talks began, reportedly earning hundreds of thousands of dollars. The firm says Board Chair Elizabeth Yeu only disclosed the full extent of her ties to the board days before the deal was signed, an argument in-line with STAAR’s initial proxy statement on the matter. It also cites two other directors with significant business interests involving Alcon. Broadwood further highlighted that STAAR’s executives stand to receive roughly $55 million in change-of-control compensation, including $24 million for CEO Stephen Harper alone despite his 5-month tenure at the helm of the company, compensation it argues “belies” the company’s stated urgency to sell.

STAAR frames the criticism of its board chair’s consulting ties to Alcon as misleading. It notes Dr. Elizabeth Yeu has consulted for numerous eye-care companies, Johnson & Johnson, Bausch + Lomb, Carl Zeiss among them, and terminated her Alcon arrangement in late 2024, nearly a year before the merger announcement. STAAR says her Alcon fees were modest, under $90,000 a year, and disclosed to the board from the start. As for executive payouts, the company argues these are standard “change-in-control” provisions under its stockholder-approved equity plan, applied to all employees and triggered only because Alcon chose to cash out awards rather than assume them.

A Suboptimal Transaction:
At the core of it all, Broadwood contends the proposed $28-per-share deal with Alcon reflects temporary investor pessimism rather than STAAR’s intrinsic value. It argues that, absent conflicts and a rushed process, a properly run sale could have yielded a higher price or even rival bids. The firm also acknowledges Yunqi Capital Ltd., a 5.1% shareholder based in STAAR’s biggest country, China, as another major investor opposing the transaction.

STAAR defends the $28-a-share offer as a premium deal, pointing to a 51% premium to its pre-announcement close and a 59% premium to its 90-day volume-weighted average price. It argues Broadwood’s peer-group valuation analysis ignores STAAR’s lower growth profile relative to faster-growing comps. And it emphasizes that Alcon’s earlier $62 indication never matured into an offer because, after diligence, Alcon identified underlying sales and demand concerns.

STAAR: “We Understand the Market Better Than Broadwood”

STAAR’s board responded in a detailed investor presentation and the company issued a lengthy statement to Investing.com defending its process and the Alcon merger.

“The STAAR Board conducted a thoughtful evaluation of strategic alternatives over an extensive time period… Collectively, the Board and management team understand the market risks, trends, and opportunities better than Broadwood. The Board unanimously believes that Broadwood’s objections to the transaction are unfounded and that the Alcon merger is in the best interests of all stockholders,” a company spokesperson told Investing.com.

STAAR stressed that no competing offer has emerged in over a decade, including during its recently expired “window shop” period, reinforcing its view that Alcon’s offer maximizes value. It also highlighted the deal’s 51% premium to STAAR’s unaffected share price and 59% premium to its 90-day VWAP, and noted that the company’s stock had fallen more than 50% in the year prior to announcement.

"Based on our discussions with Broadwood and the unusual length of its investment at STAAR, we do not believe Broadwood is just opposed to the Alcon merger – instead, we believe Broadwood would oppose a transaction at any price that is reasonably achievable given its inaccurate and flawed understanding of our business challenges and go-forward prospects," the spokesperson added.

China, Growth Prospects, and Tariff Risks

STAAR’s presentation leaned heavily on its geographic risk narrative, noting its “overweight exposure” to China, increasing competition, limited product offering beyond high-myopia patients, and tariff exposure.

A source supportive of the Alcon deal characterized STAAR’s Chinese business as approaching saturation, a sentiment echoed in STAAR’s investor presentation. Broadwood, however, has consistently pushed back on that framing. A source opposing the transaction told Investing.com that suggestions of saturation are preposterous, noting STAAR’s 23% share of the Chinese refractive surgery market compared with its more than 70% share in Japan, and arguing that demand in China is still recovering.

Yunqi Capital, a 5.1% shareholder based in China, has publicly opposed the merger as well. In its own letter to fellow shareholders, Yunqi has cited signs of a broader rebound in Chinese equities and refractive surgery demand as evidence that STAAR’s growth story in its largest market remains intact, a view broadly aligned with Broadwood’s criticism of the timing of the sale.

Conflicts of Interest and the Sale Process

The most contentious section of Broadwood’s definitive proxy revisits potential conflicts. Broadwood again alleged that STAAR insiders, including at the advisory level, had prior relationships with Alcon when merger talks began, and questioned whether this compromised the board’s ability to maximize value.

The company’s history with Alcon runs deep. Proxy filings reveal regular conversations between Alcon CEO David Endicott and former STAAR CEO Thomas Frinzi, who led STAAR until early 2025, which produced Alcon’s first $62-per-share bid and led to the current $28 deal. Frinzi’s connections extend to Alcon’s boardroom: during his time at STAAR he was Executive Chair of Aurion Biotech, backed by Deerfield and Alcon, and resigned abruptly in February 2025 amid a governance battle. In a case now in litigation, Deerfield alleges Alcon engineered a board deadlock at Aurion to block an IPO and later acquire the company at a discount, citing Endicott’s personal ties to Frinzi. STAAR Chair Dr. Elizabeth Yeu also consulted for Alcon through October 2024, and former STAAR director Amy Winser sits on the board of Lensar Therapeutics, another Alcon acquisition. Collectively, these relationships form a backdrop to Broadwood’s conflict-of-interest narrative.

STAAR’s board has pushed back, reiterating that it retained independent advisors and followed a rigorous process. It argues that the absence of competing offers, despite months of outreach, speculation, and a 45-day “window shop” period, validates its conclusion that Alcon’s deal is the best and only realistic option for shareholders. The company has also pointed to Chair Yeu’s industry-wide consulting work, the public disclosure of her past Alcon engagement, and the board’s collective determination that “she did not have an interest in Alcon or the potential transaction with Alcon that would impair her ability to exercise her independent business judgment.”

What’s Next?

Last week’s filings represent less a shift in strategy than a crystallization of each side’s case. Broadwood’s definitive proxy formally launches its solicitation effort, while STAAR’s new presentation and statements sharpen its messaging to shareholders ahead of the vote.

The clash sets up a decisive showdown over the Alcon merger. Broadwood, with its 27.5% stake, cannot block the deal on its own but can rally other investors; STAAR, meanwhile, has lined up support from other large holders and is stressing the certainty and immediacy of the Alcon cash offer.

Shareholders now face weeks of dueling campaigns. The proxy vote will ultimately determine whether STAAR’s decade-long independence ends with an Alcon acquisition or if Broadwood can derail the deal and push for a different future.

For now, the fight is no longer over whether each side will state its case, but over which case shareholders will believe.