Icahn at it again; Visx increases size of board

Corporate raider Carl Icahn is again setting his sights on Visx. In an unrelated move, the excimer laser manufacturer increased the size of its board of directors.

SANTA CLARA, Calif. — If at first you don’t succeed, try, try again. No doubt corporate financier Carl Icahn had that axiom in mind when he made a filing with the Securities and Exchange Commission late last year. The filing informed Visx stockholders that he plans to present another slate of directors for the Visx board, to be voted on at their next stockholder meeting in May.

This year’s slate is virtually identical to the last one he proposed, except that Robert L. Knauss replaces Dr. Samuel D. Waskel.

In November 2000, Mr. Icahn, through his holding company Barberry Corp, proposed five directors to replace the current Visx board, in hopes of taking control of the well-regarded company. However, 3 days before the May 4, 2001, stockholder meeting, Mr. Icahn ended his proxy contest to overturn the Visx board of directors.

At that stockholder meeting, Visx stockholders re-elected all five directors who, in turn, elevated president and chief executive officer Elizabeth Davila to chairman of the board. Visx stockholders re-elected Glendon E. French, John W. Galiardo, Jay T. Holmes, Richard B. Sayford and Ms. Davila.

Visx increases number of directors

In an unrelated move that Visx was pursuing long before Mr. Icahn’s latest SEC filing, the company announced in December the appointment of Kathryn E. Falberg and Gary S. Petersmeyer to its board of directors, bringing the total number of Visx board members to seven.

In a press release, Ms. Davila stated, “We are delighted to have Ms. Falberg and Mr. Petersmeyer join our Board. With their broad and diverse experiences, they bring exceptional talent and a wealth of knowledge to Visx. We will be taking full advantage of their expertise as we expand our business and grow in the laser vision correction industry.”Ms. Falberg is currently a special advisor to Amgen Inc. For 3 years before taking on her current role, Ms. Falberg was Amgen’s senior vice president finance and chief financial officer.

According to Visx, Mr. Petersmeyer is an experienced senior executive who has led companies whose product sales were driven by consumer demand and based on discretionary consumer spending. From 1983 to 1986 he was president of CooperVision’s optics division. In 1995 he joined Collagen Corp. as chief operating officer and later served as chief executive officer until the company’s sale in 1999.

“Liz [Davila] wanted to broaden the expertise of the board. The current board members have been here since the beginning, and Liz was hoping to infuse some fresh blood and fresh ideas into the board,” said Lola Wood, Visx director of investor relations.

Another tough fight?

According to Ms. Wood, Visx views the latest filing by Icahn as the same tactic as last time, attempting to overtake the company by changing the board.

“We’re a profitable company. We generate cash on an operating basis every quarter,” Ms. Wood said in an interview with Ocular Surgery News.

The last battle over control of Visx lasted from November 2000 to May 2001 and featured a heavy barrage of press releases by both camps attempting to remain in control of the majority of Visx stockholders.

In November and December 2000, Mr. Icahn, who owns roughly 11% of Visx’s stock, sent letters to Mark Logan, then CEO and chairman of Visx, asking him and the board to consider selling the company to a better capitalized company with a broader product base in ophthalmology.

In March 2001, Mr. Icahn announced he was distributing a proxy stockholder ballot to all Visx stockholders. He hoped that by installing a new board of directors, it would be possible to change the focus of Visx to more actively look for merger partners.

He had already asked the board to consider an open public auction on its own. He stated that if his own slate of directors was elected, he would hold an immediate auction the day of the stockholder meeting.

At the time, some published reports named Novartis AG, Johnson & Johnson and Allergan as possible partners for a merger.

In April, Mr. Icahn pushed the envelope even farther by offering to finance $1.8 billion for a merger between Visx and one of his own companies. He was offering $32 a share for the company, at the time a premium of more than 50% over the April 19 closing price.

However, the offer came heavily qualified. Visx decided to call Mr. Icahn’s apparent bluff by announcing that it had amended its stockholder rights agreement and that the board would not stand in the way of any “all cash” tender offer at or above the $32-per-share price.

Declaring that they believed Mr. Icahn’s merger offer was disingenuous, Ms. Davila announced that the board wanted to show stockholders their commitment to enhancing stockholder value. She said that, more likely, the Icahn offer to auction the company offered nothing new to Visx stockholders and would require the company to raise $300 million of new debt while diluting earnings and restricting Visx’s ability to invest in the future.

In the end, and with little fanfare, Mr. Icahn withdrew his slate of nominees for the board. He said he would continue to follow up on his promise of a $1.8 billion merger. Visx responded that they were prepared to permit Mr. Icahn to commence due diligence in order to formulate a definitive all-cash proposal at $32 a share or higher following his signing of a customary confidentiality agreement.

Since the May election of the Visx board there has been no public word of any offers for Visx. After the Icahn proposal, Visx’s stock rose from $17 in mid-March to just under $24 at the end of April. Since then however, the stock value steadily declined until September, where it has remained somewhat steady, resting around the $13-a-share mark as of Dec. 19.

In July 1999, Visx stock reached its all-time high of $103.75 a share.

Icahn’s board appointments

The November 2001 board proxy announced by Mr. Icahn consists of the Hon. Jerome M. Becker, Russell D. Glass, Mr. Knauss, Paul J. Zegger and himself.

Mr. Icahn is best known for his attempts at corporate takeovers of Texaco, Trans World Airlines and Nabisco. He ran TWA from 1985 until 1993 and attempted to reacquire the company earlier this year, before losing out to American Airline’s parent company, AMR Corp.

Previously, Mr. Icahn has served as chairman of the board and a director of Starfire Holding Corp. (formerly Icahn Holding Corp.), a privately held holding company, and chairman of the board and a director of various subsidiaries of Starfire, including ACF Industries Inc., a privately held railcar leasing and manufacturing company and ACF Industries Holdings Corp., a privately held holding company for ACF.

Judge Becker serves as chairman of the N.Y. State Housing Finance Agency, the N.Y. State Affordable Housing Corporation, the N.Y. State Project Finance Agency and the N.Y. State Municipal Bond Bank.

Mr. Glass has been president and chief investment officer of Icahn Associates Corp., an investment firm. Since August 1998 he has also served as vice chairman of Lowestfare.com LLC, an Internet travel reservations company.

Mr. Knauss has served as CEO of Baltic International USA Inc., a company that provides capital, management and technical services to startup and established private companies. He served as Dean of the University of Houston Law Center from 1981 through 1993. Mr. Knauss has served as a director of Equus Investments Inc. since 1984.

Mr. Zegger is a partner of Pennie & Edmonds LLP, a law firm specializing in intellectual property and technology law. Mr. Zegger joined the New York office of Pennie & Edmonds LLP in 1987.

Mr. Icahn has not increased the number of board members to be voted on since Visx increased the size of its board of directors.

Mr. Icahn could not be reached for comment.

For Your Information:

• Elizabeth Davila and Lola Wood of Visx can be reached at 3400 Central Expressway, Santa Clara, CA 95051-0703; (408) 733-2020; fax: (408) 733-7278.
• Carl Icahn can be reached via 767 Fifth Avenue, 47th Floor, New York, NY 10014; (212) 702-4309.