Broadwood Partners Urges STAAR Surgical (STAA) Shareholders to Reject Alcon Deal, Calls for Board and Leadership Changes

STAAR Surgical Company
25510 Commercentre Dr.
Lake Forest, CA 92630

Dear Members of the Board:

Since the announcement of STAAR’s proposed sale to Alcon in August, we have been engaged in a spirited debate with you over the Company’s prospects and the merits of the proposed deal. As you know, we have felt from the start that this transaction materially undervalues STAAR and was the product of a deeply flawed process undertaken at the wrong time in STAAR’s history.

As we approach the thrice-delayed special meeting of shareholders, we are confident our fellow shareholders will agree with us and reject this ill-advised transaction. Several large shareholders, all three proxy advisory firms and at least one of the Company’s own directors have rightly expressed great skepticism about the process, timing and price of the proposed deal.

Soon, it will be your task to govern STAAR in the post-transaction era. We write to express our continued support for the Company, its products and its opportunity. For more than thirty years, Broadwood has been an engaged and constructive shareholder, providing both equity and debt capital when needed, purchasing its shares in the open market at times when they have been cheap, and advising when and as asked. We pledge to continue to do so when the Company turns the page on this latest chapter. As we have said before, we believe the Company needs new leadership and several new directors that have the confidence of shareholders. We would welcome the opportunity to work with other shareholders and you to ensure that transition of key leaders occurs seamlessly.

As you also know, the only option available to shareholders in the near term to improve the Board is to call a special meeting to remove some directors, since your bylaws do not allow shareholders to do anything else. We cannot, for example, put forward director candidates for shareholders to elect until the next Annual Meeting, whenever that may be. But the best way to turn the page would be for the Board to work with shareholders to immediately make the changes that are needed to restore its credibility and alignment with shareholders.

After all, we want nothing more than for STAAR to succeed and for all shareholders to benefit from that success. And, we are confident that STAAR will succeed if it remains an independent Company in the near term, even if it is later acquired through a truly fair and open auction process.

With inventories normalizing in China and new products being launched, our analysis and financial models indicate that there is a clear path to a $50 per share stock price next year, even without a return to normal growth rates in the global refractive surgery market. We also are confident that the refractive market’s return to normal growth is a matter of when, not if. We should all keep in mind that, just a few years ago, when this business was significantly smaller, STAAR’s stock price reached $160 per share. Now, the management team is projecting strong growth, great margins, substantial operating leverage, and considerable free cash flow.

Our industry sources in Asia, Europe, and the Western Hemisphere have confirmed this outlook and have provided us with considerable input on how the business can be improved further. We have received business plans and other recommendations for how STAAR can be improved quickly and become even more successful over time. And a range of ophthalmology industry executives, some quite prominent, have reached out to us, indicating that they would love to help lead STAAR into the future because the Company’s opportunity is so clear, and its valuation is so low.

The advantages of STAAR’s technology provide an opportunity for the refractive surgery market to continue its longstanding trend of steadily shifting from laser tissue removal to its lens-based future. As you know, one of the most prominent refractive surgeons in the world stated at a recent medical conference that he believes that STAAR’s technology will become the standard of care in refractive surgery in the next five years. One does not need to be anywhere near that optimistic to recognize the very large business and shareholder value opportunity ahead, if STAAR is well run and rebuilds credibility with shareholders.

STAAR’s future is bright, so it should be allowed to shine. We are eager to work with you and other shareholders as soon as possible. We have never sought control of STAAR, nor are we doing so now. A collaborative approach, with a sense of urgency, is what is needed.

The special meeting is scheduled for Friday. We hope we will hear from you on Friday or Saturday, so that we can work together to implement needed changes in a manner that ensures the continued success of the business, and the confidence of all shareholders.

Sincerely,

Neal Bradsher
Founder and President
Broadwood Capital, Inc., General Partner of Broadwood Partners, L.P.

Source: https://www.sec.gov/Archives/edgar/data/718937/000121390025122870/ea0270106-dfan14a_broadwood.htm