Weird Events, Part 1: Alcon’s STAAR Surgical Deal ($ALC, $STAA)
The first in a series on the weirder corners of the event-driven market.
TL;DR: Event investing gets weirdest when multiple situations collide. In STAAR Surgical’s (STAA) case, you’ve got a merger arbitrage1 with a no break fee go-shop combined with a ~30% shareholder leading a shareholder rebellion. (full article below)
I’m working on a few different posts talking about special situations and unique special situations…. but, in the process of writing those posts, there were a few really quirky situations that I wanted to discuss that would overwhelm those other articles.
So, rather than have the quirky situations overwhelm the other articles, I figured I’d do a separate article to hop through them real quick… but, before we get there, let me make a call out on what makes these situations unique.
There are lots of different types of events: a spin-off, a bidding war, an activist fight, etc. All of them can be interesting and (potentially!) lucrative.
But I have found that the most unique events will be a combination of different events. It’s kind of an exponential equation; when you add an activist fight with a spin-off, it’s not twice as interesting…. it’s four times as interesting2.
The first company3 I want to talk about will illustrate this nicely. STAAR Surgical (STAA4) combines a proxy fight with merger arbitrage and a potential bidding war / go-shop.
Sound interesting? I certainly think so!
Let’s start with some background. In August, Staar announced a deal to be acquired by Alcon for $28/share, a ~60% premium. Shareholders must be thrilled, right?
Not exactly! STAA had traded for ~$50/share in early 2024, and STAA’s proxy reveals that Alcon had offered to buy STAA for $58/share in April 2024. However, in late 2024 and early 2025, sales in STAA’s largest market (China) fell off a cliff. STAA’s stock imploded in response to the sales drop (and management was also changed out!), bottoming in the mid-teens before Alcon’s acquisition was announced.
Shareholders were not happy with STAA’s decision to sell themselves. Led by Broadwood (who owns just shy of 30% of STAA’s stock), shareholders have pushed back strongly against the deal (72% of shares were set to vote against the deal before the original shareholder meeting in late October was postponed!). Shareholders believe STAA is selling themselves at an absolute low valuation on trough numbers despite evidence the China business is rebounding5. Shareholders have already forced STAA to delay the meeting to approve the Alcon deal twice (the delay happened because the deal would have been voted down), and, under continued pressure from shareholders, Alcon and STAA amended their merger in early November to allow for a go-shop with no termination fee if STAA accepts a superior proposal. Shareholders don’t seem placated; Broadwood is currently “well along in the multi-step and time-consuming process that is required to call a Special Meeting of Shareholders” to remove multiple directors (their words, not mine!) in order to get the Alcon deal terminated for good and get directors more aligned with their views of value installed.
Why is this situation so interesting?
Just look at the prior paragraph. Short of adding a CVR or spin-off to the deal, I’m not sure how they could get any more event-driven themes packed into one event. In this one STAA deal, you have:
Merger arbitrage
Activism
A go-shop
A contested deal vote
A potential proxy contest / special meeting
That’s five different event driven angles…. with a little bit of international macro6 thrown in for good measure. That’s wild!
There is one particular angle to this situation that I think is interesting (and that I don’t think I’ve seen anyone discuss): Alcon’s view of STAA’s value. Alcon clearly wants to buy STAA; Alcon wouldn’t have put out their early November critique of STAA’s activists if Alcon didn’t want STAA7, and Alcon wouldn’t have amended the merger contract to make it more palatable to shareholders! However, Alcon also clearly believes they are paying a full price for STAA; STAA was basically begging Alcon to raise their offer when it was clear the first bid was about to fail, and Alcon consistently and firmly turned them down. Alcon also agreed to let STAA have a go-shop with no break fee to try to get the merger over the finish line; Alcon only does that if they want to own STAA and believe there’s almost no chance someone is coming in over the top (if Alcon believes anything else, they’d demand a go-shop payment to tilt the odds in their favor and to get something out of the whole ordeal!).
So, by turning this deal down, shareholders are explicitly voting Alcon is wrong about STAA’s value. That is a bold bet (and, given the recovery in China sales, one that may turn out to be correct!). It’s not one I’m looking to make, but what a fascinating set up!
That’s it for STAA and part 18 of this series. I’ll see you early next week for part 29.
As I write this, the stock trades for ~$26.50/share; the Alcon deal we’ll discuss is for $28/share and could close this month if shareholders approve it, so you’ve got ~6% gross spread for a deal that could close in weeks. I won’t bother to do the IRR on that as it’s bananas!
Yes, I realize that my exponential / addition math there is a little loose. You get what I’m saying!
This will be a multi-part series
No current position, but I traded a small position off and on through November.
Shareholders have also (perhaps correctly) noted that management was touting the China slowdown as a speed bump right up until the Alcon deal was announced.
International macro = the China business rebound
I believe they also could have told STAA “this is hopeless; let’s just let the vote fail and move on” if they had really wanted to walk…. I think the contract requires them to let STAA delay the vote and try to get it over the finish line, but given how badly the vote was going to fail I think everyone could see the writing on the wall without some willingness from both sides to give shareholders something / modify the deal in some way!
I love the rule of threes, so I’d love to make this a three-part series…. but, to be honest, there are only two situations I’m following that fit this pattern and that I want to write publicly…. so, if you have an idea for a third, I’d love to hear it!
Spoiler alert: Part 2 is the incredible family drama at Lifeway (LWAY); I was originally going to do this all as one article but the drama there is so long running and wild I had to separate it out to give myself enough time and space to write it all down!