Street Calls of the Week
Investing.com -- The proxy war between STAAR Surgical Company (NASDAQ:STAA) and its largest shareholder, Broadwood Partners, has reached a fever pitch this week after influential proxy advisory firm Glass Lewis & Co. recommended that shareholders vote against the proposed $28-per-share sale of STAAR to Alcon AG (NYSE:ALC).
The report marks a watershed moment in the months-long standoff, aligning the proxy giant with Broadwood and fellow dissenters Yunqi Capital and Defender Capital in arguing that the deal undervalues the company, was rushed through under questionable circumstances, and may be tainted by conflicts of interest.
The recommendation represents a monumental win for Broadwood, which has led a relentless campaign to block the sale since its announcement in August. Together with Yunqi, Defender, and other outspoken holders, including CalSTRS and former CEO David Bailey, the opposing parties now represent over 34% of STAAR’s outstanding shares, an amount that could determine the fate of the $1.5 billion merger when shareholders vote at a special meeting on October 23.
With Glass Lewis siding squarely with the activists, and Institutional Shareholder Services (ISS) still to weigh in, the outcome of the shareholder vote has shifted from routine approval to open uncertainty.
A sale at half the price of earlier offers
In April 2024, STAAR rejected a $58-per-share bid from Alcon, which later withdrew a $55 offer with a $7 contingent value right (CVR). Yet, after a year of collapsing Chinese sales and a battered stock price, STAAR’s board agreed to sell for just $28 per share, a decision Broadwood has called “indefensible.” STAAR’s board has continually defended the deal, pointing out a 59% premium to its 90-day average trading price prior to the announcement.
STAAR, a California-based medical device maker specializing in implantable lenses (EVO ICLs) for medium-to-high nearsightedness correction, has seen its valuation drop amid slowing growth and heavy competition in its key Chinese market.
Alcon, the largest global player in ophthalmic surgery products, positioned the deal as a logical combination to accelerate adoption of STAAR’s ICL technology worldwide. STAAR’s board unanimously endorsed the merger, presenting it as a way to secure near-term value for investors and stabilize the company’s future amid what it described as “structural headwinds.”
But Broadwood Partners, a long-term investor holding roughly 27.5% of STAAR’s shares and involved with the company for three decades, has since opposed the sale, arguing it was a fire sale conducted at the wrong time, through a flawed process, and for the wrong price, all expedited by a conflicted board and management team.
Glass Lewis: “Wrong time, wrong process, wrong price”
In its report this week, Glass Lewis largely sided with Broadwood’s assessment. The proxy advisor said STAAR’s board executed the deal at a time when its financial performance and forecasts pointed to an imminent rebound, thereby “preempting the market’s ability to reappraise the company’s standalone value.”
It criticized the company’s decision to sign and announce the merger one day before its second-quarter results, which exceeded expectations, arguing the timing “blunted price discovery” and prevented both the board and shareholders from fully understanding STAAR’s recovery trajectory.
On process, Glass Lewis described a “fractured and disconcertingly dormant methodology,” noting that CEO Stephen Farrell and Board Chair Dr. Elizabeth Yeu allegedly failed to disclose inbound acquisition interest to other directors, a bombshell the firm said was admitted by STAAR representatives during its engagement.
Glass Lewis also raised alarms over a $23.7 million golden parachute for Farrell, including a $6.8 million tax gross-up, despite his mere five months in the CEO role, calling it an “egregious windfall for five months of pre-execution executive service.” The proxy firm concluded that the process was neither robust nor transparent, with limited solicitation of alternative bidders, rushed diligence windows, and termination fees that disincentivized competing offers.
On valuation, the advisory firm’s analysis found that the deal’s implied multiple, approximately 4.6x forward revenue, fell in the 34th percentile of comparable medical device buyouts and well below STAAR’s historical trading multiples. In its words, the transaction “rests on a relatively recent trading nadir” rather than fair value.
Its recommendation was unequivocal: shareholders would be “better served scuppering the current arrangement in favor of either a full process reset or the unadulterated pursuit of the company’s standalone potential.”
Broadwood’s four-part thesis: timing, process, conflicts, valuation
Broadwood’s campaign has long revolved around four pillars: inopportune timing, a flawed process, a conflicted board, and a suboptimal valuation.
The firm argues STAAR’s board sold the company “at the bottom” of a temporary downturn rather than a structural decline, ignored alternative bidders, allowed conflicts tied to Alcon to taint deliberations, and accepted a price that fails to reflect the company’s dominant technology and recovery prospects.
In its latest filings, Broadwood accuses STAAR’s leadership of revising internal forecasts downward days before the board vote, engineering a lower valuation that aligned neatly with Alcon’s bid. It also alleges Citigroup used an unjustifiably high cost of capital in its discounted cash flow analysis, artificially compressing the fair value range. Under standard assumptions, Broadwood estimates STAAR’s fair value at over $41 per share.
The hedge fund’s opposition began to intensify after STAAR’s initial proxy revealed that two potential buyers, referred to as Party A and Party B, described respectively as a private equity firm with Chinese portfolio interests and a healthcare investment platform, had reached out to a board member on August 3, just one day before the Alcon deal was signed. The board gave them less than 24 hours to respond. Broadwood argues this effectively shut down competition and ensured Alcon would remain the only bidder.
Broadwood has also criticized potential conflicts of interest on the board, pointing to Chair Dr. Elizabeth Yeu’s prior consulting relationship with Alcon, which remained active when the company first expressed interest in a deal.
Additionally, STAAR’s 45-day “window shop” period expired September 19 without competing proposals. Afterward, the breakup fee payable to Alcon nearly quadrupled, further discouraging new bids. Broadwood says the sale process inherently created this lack of offers; STAAR says it’s the other way around, pointing out that despite rumors of a sale, no parties launched a formal offer in the months leading up to the deal.
STAAR’s rebuttal: premium, certainty, and de-risking
STAAR’s board has strongly rejected Broadwood’s accusations, calling them “flawed, misleading, and misinformed.” The company argues the Alcon transaction delivers a compelling and certain cash premium of 59% to the 90-day volume-weighted average price (VWAP) and 51% to the last close before announcement.
In a new release issued Wednesday, STAAR said Broadwood’s campaign is “driven by self-interest” and warned that rejecting the merger could send shares back toward their pre-deal level near $18 per share. The company reiterated that the transaction provides “immediate and certain value” at a time when STAAR faces “ongoing volatility, uncertain macroeconomic conditions, and significant competitive and regulatory pressures.”
On timing, STAAR maintains that the merger decision followed an extensive, year-long strategic review overseen by independent directors. The company says the board evaluated multiple alternatives, including a standalone plan and potential partnerships, before determining that Alcon’s all-cash offer was the best available option in light of softening demand in Asia and near-term profitability challenges.
On process, STAAR said its review was “robust and thorough,” including a 45-day post-signing “window shop” period that allowed other bidders to emerge. “No alternative proposals were received,” the company emphasized, saying that outcome confirms Alcon’s bid represents the highest and best value reasonably attainable.
On conflicts, STAAR has defended its directors and advisors, saying claims of bias or improper influence are “completely unfounded.” The company said Chair Dr. Elizabeth Yeu’s previous consulting relationship with Alcon was modest, disclosed, and ended months before merger discussions resumed. It added that the board determined Yeu had no interest impairing her independent judgment before voting unanimously to approve the deal.
On valuation, STAAR rejected Broadwood’s claim that Citi’s fairness opinion used improper assumptions, saying the analysis reflected “realistic market risks and current business conditions.” The company accused Broadwood of inflating its own estimates and relying on “rosy growth assumptions” disconnected from actual sales trends. “Our board chose a disciplined, fact-based approach grounded in market data,” STAAR said.
Responding to the Glass Lewis report, STAAR said it “strongly disagrees” with the proxy advisor’s conclusions, arguing the firm “overlooks key contextual factors” and “fails to recognize the certainty and strategic logic” of the Alcon merger. The company said Glass Lewis “mischaracterized the timeline of the sale process” and “ignored the comprehensive analysis conducted by Citi and the board over twelve months.”
Defender Capital joins the opposition
Adding to the company’s challenges, Defender Capital, a long-term shareholder with roughly 1.5% ownership, came out against the merger this week. The firm highlighted that STAAR had rejected Alcon’s $58-per-share bid just 16 months earlier and questioned the rationale for selling now at less than half that price.
"With recent positive projections and outlook released by management, we see no compelling reason to sell STAAR at this time,” Defender said.
Defender joins Broadwood and Hong Kong–based Yunqi Capital, which owns about 5% of STAAR and argues that the Alcon bid “materially undervalues” the company’s rebound potential in China. Yunqi has cited improving macro conditions and inventory normalization as signs STAAR’s downturn was transitory, not permanent.
On the other side sits Soleus Capital, STAAR’s second-largest active stockholder with a 6% stake. "Soleus has informed the Board that it is supportive of the merger and intends to vote in favor absent a material change in circumstances," STAAR announced in late September.
Glass Lewis: institutional weight
While activist rhetoric can polarize, Glass Lewis’ recommendation injects objective, institutional weight into the opposition. Many large asset managers and index funds align their votes with Glass Lewis or ISS, meaning the proxy advisor’s stance could directly influence the merger’s fate.
For Broadwood, the endorsement validates months of pressure. For STAAR, it presents a serious headwind: if ISS follows suit, the merger’s path to approval may narrow dramatically.
STAAR’s core business
Founded in 1982, STAAR Surgical develops and manufactures implantable collamer lenses (ICLs) used to correct nearsightedness without cutting the cornea. Its flagship EVO ICL franchise controls roughly 90% of global phakic intraocular lens revenue, shielded by a web of patents covering its proprietary Collamer material, lens designs, and injector systems.
ICL adoption has surged as patients seek reversible, non-LASIK alternatives, though STAAR’s exposure to China, where sales plunged amid distributor destocking and weak consumer spending, has been its Achilles’ heel. Broadwood argues the slump is temporary; STAAR says the market is nearing saturation.
The company’s appeal lies in a 30-year safety record and growing U.S. adoption since the FDA approved EVO ICL in 2022. Critics of the Alcon deal say those advantages make the $28 sale price particularly hard to justify.
Some investors view the STAAR dispute as part of a broader pattern of aggressive consolidation by Alcon, which has engaged in six acquisitions or major investments over the past year. Earlier this year, the Swiss eye-care giant faced litigation over its control of Aurion Biotech, where investors allege Alcon, through the help of former STAAR CEO Thomas Frinzi, engineered a board deadlock to block an IPO and later acquired control at a discount.
To critics, STAAR fits a similar narrative: a dominant player neutralizing a disruptive rival before its technology can erode market share. To supporters, STAAR faces higher odds of failure standalone than it does with the support of a key industry player like Alcon, and investors get to benefit from the cash-in rather than facing saturation risks.
Why it matters
If the merger passes, it will cement Alcon’s dominance in ophthalmic lenses and deliver STAAR shareholders an immediate cash exit. If it fails, STAAR’s valuation could drop in the short term, but Broadwood and its allies argue the company can recover, cut costs, and pursue a new, transparent sale process “from a position of strength.”
As ISS’s recommendation and the October 23 vote approach, STAAR’s future and the credibility of its board hang on the outcome.