Evaluating Shareholder Value in the STAAR Surgical-Alcon Merger: Why Proxy Advisors Are Unanimously Rejecting the Deal

The proposed merger between STAAR Surgical and Alcon has ignited a fierce debate over corporate governance and transaction fairness, with proxy advisors uniformly rejecting the deal. This consensus among institutional stakeholders-spanning firms like Egan-Jones, Institutional Shareholder Services (ISS), and Glass Lewis-reflects deep concerns about the board's stewardship and the adequacy of the process used to secure the transaction. At the heart of the criticism lies a fundamental question: Did STAAR's board act in the best interests of shareholders, or did it prioritize expediency and a preordained outcome?

Governance Concerns: A Board Under Scrutiny

The STAAR Surgical board has faced relentless criticism for its handling of the merger process. Broadwood Partners, a major shareholder owning 30.2% of STAAR's outstanding stock, has been particularly vocal in its dissent. The firm argues that the board failed to maximize shareholder value by not seeking an updated fairness opinion despite significant improvements in peer valuations and better business performance over the past two quarters according to a report. This omission, critics contend, suggests a lack of rigor in assessing whether the revised terms of the deal-offering a 59% premium to the 90-day volume-weighted average price-truly reflect STAAR's intrinsic worth according to investor statements.

Compounding these concerns is the board's refusal to disclose inbound interest from a respected private equity firm willing to pay more than Alcon. Broadwood Partners asserts that this omission in the proxy statement represents a material failure to provide shareholders with a complete picture of the company's value according to reports. The board's inaction, according to proxy advisors, undermines the credibility of its claim that the merger is the "best achievable outcome" given market conditions according to investor statements.

Transaction Fairness: A Flawed Go-Shop Process

The go-shop process, a critical mechanism for ensuring competitive bidding, has been described as "performative" and ill-designed. Glass Lewis, one of the leading proxy advisory firms, criticized the 30-day go-shop period as insufficient to attract meaningful alternatives, particularly given the time constraints and the lack of transparency in the process according to a report. The firm further noted that the process was "remarkably threadbare" and inherently biased in favor of Alcon, with terms structured to limit the ability of other bidders to emerge according to the same report.

ISS echoed these concerns, recommending shareholders reject the deal due to the absence of a robust auction process. According to a Reuters report, ISS argued that the revised consideration from Alcon remains inadequate relative to STAAR's standalone valuation, failing to account for the company's recent operational improvements and market dynamics according to the report. The lack of alternative bids, despite the go-shop period, has left many shareholders questioning whether the board genuinely sought to optimize value or merely rubber-stamped a prearranged agreement.

STAAR's Defense: Strategic Necessity or Complacency?
STAAR Surgical has defended the merger as a strategic imperative, citing the need to mitigate standalone business risks such as declining sales in China and intensifying competition according to investor statements. The board has emphasized the 59% premium as a compelling offer, arguing that no viable alternatives emerged during the go-shop period. However, critics like Broadwood Partners dismiss this rationale as a justification for complacency. They argue that the board's refusal to bring in new directors or restructure its governance framework further erodes confidence in its decision-making according to a report.

The board's insistence on proceeding despite overwhelming shareholder opposition-over 70% of shares are reportedly opposed to the deal-has also drawn ire. Egan-Jones, another major proxy advisor, reaffirmed its "AGAINST" recommendation, citing the board's lack of objectivity and its failure to address stakeholder concerns according to a press release. This disconnect between management and shareholders underscores a broader governance failure: the board's inability to act as an independent check on its own decisions.

Implications for Shareholder Value

The STAAR-Alcon merger serves as a cautionary tale about the importance of rigorous governance in M&A transactions. Proxy advisors' unanimous rejection of the deal highlights the growing scrutiny of board accountability, particularly in cases where processes appear to lack transparency or competition. For shareholders, the lesson is clear: a premium offer is not inherently fair if the process to secure it is flawed.

As the debate over this merger unfolds, it raises critical questions about the role of proxy advisors in shaping corporate governance standards. Their collective stance signals a shift toward demanding not just better outcomes, but also more transparent and equitable processes. For STAAR's board, the rejection of the deal may ultimately hinge on its willingness to heed these concerns-or risk facing a shareholder revolt that could reshape its leadership and strategy.