With takeover attempt behind it, Visx looks to its future

Visx withstood a corporate raider's attempt to wrestle away control of the company. The new chairman of the board declares Visx healthy and ready to move on.

Issue: June 15, 2001

SANTA CLARA, Calif. — In December 2000, well-known 1980s corporate raider Carl Icahn let excimer laser maker Visx know he had every intention of contesting their stockholder vote and having his own slate of directors elected to the board.

In March, the paper war of press releases between Mr. Icahn and Visx management escalated to sometimes three-a-day postings in an attempt to sway stockholders to vote for one slate of directors over another at the Visx annual stockholder meeting.

However, three days before the May 4 stockholder meeting, Mr. Icahn ended his proxy contest to overturn the current Visx board of directors.

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

Now that the challenge is past, said the new chairman in an interview, the company is looking to its future.

A misguided attempt

In an interview with Ocular Surgery News, Ms. Dàvila explained that Mr. Icahn's goal of selling the company to turn a profit was already a process that Visx was looking into when Mr. Icahn initially contacted Visx.

“In December, we received our first indication of a possible takeover. Our bylaws state that the SEC (Securities and Exchange Commission) must be notified of any proxy contests,” Ms. Dàvila said.

In October 2000, Mr. Icahn took 10% ownership of Visx stock. Ms. Dàvila said she believes his rationale was that the company and industry were in good health. He had seen Alcon's acquisition of Summit and believed that Visx was at a good premium as an acquisition candidate.

According to Ms. Dàvila, what Mr. Icahn did not know, nor did anyone else at the time, was that Visx was already well into the process of looking into viable companies to discuss various strategic alternatives.

“There was nothing wrong with his logic. We came to the same conclusion months before,” she said.

In his letters to Visx management and his press releases and SEC filings, Mr. Icahn said Visx was opposed to selling the company. “We weren't opposed to it at all. We disclosed, in response to his filing, that Goldman Sachs was representing Visx in evaluating all business combination possibilities,” Ms. Dàvila said.

Stockholder faith

Ms. Dàvila said that the management of Visx was never terribly worried about the outcome of the proxy contest.

“The process was a very interesting one. Carl Icahn is a very astute businessman. But in our case, we were in close contact with our stockholders. The issue really came down to the $32 all-cash offer. The stockholders wanted the opportunity to vote if, in fact, a $32 all-cash offer was forthcoming. that this management said they would allow,” Ms. Dàvila said.

She explained that conversations with Visx's stockholders gave the management confidence. Stockholders wanted a board independent of Mr. Icahn. They recognized the need of an independent board, like the current board, she explained.

The proxy contest concerns were limited only to management, Ms. Dàvila said, and did not interfere with the day-to-day activity of the company.

Stock prices

Since the May 4 election of the Visx board there has been no public word of any offers to buy Visx. From the time of Mr. Icahn's 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 has declined, with its last sale price at $20.86 on May 22.

In July 1999, after two 2-for-1 stock splits, Visx stock reached its all-time high of $100 a share. It then dropped steadily until February 2000, where it has remained somewhat constant at around the $20-a-share mark.

Ms. Dàvila explained that Visx has cycled down in line with other tech companies. “We just went down a little sooner. The stock market itself is experiencing a down cycle in the overall equities market. The laser vision correction industry is in its infancy but the market potential is remarkable. The key to Visx's success remains procedure growth.

Three future avenues

With Icahn's failed proxy attempt behind them, Visx is now looking toward its future potential. Ms. Dàvila described the three main avenues the company can follow.

“As a standalone independent company, we are optimally positioned. Visx is the leader in market technology and growth potential. Visx has a tremendous track record of success. We are strong and can be independent for a long time,” Ms. Dàvila said.

The second choice Visx can consider is to expand its scope into other ophthalmic fields. “We have looked at a number of opportunities in the world of ophthalmology from a technology standpoint, but most of what we've seen has not been particularly compelling.” The agreement Visx has entered into with Stanford University for the treatment of age-related macular degeneration, an exciting endeavor, but it is not a guaranteed payoff.

The third, and to many analysts the most likely choice, is acquisition.

“It's not uncommon, in all fields of business, to put companies together. If that offer presents itself, we would look into it. We have a healthy company. It's something we're prepared for,” Ms. Dàvila said.

For Your Information:

Liz Dàvila can be reached at Visx, 3400 Central Expressway, Santa Clara, CA 95051-0703; (800) 246-8479; Web site: www.visx.com.

Carl Icahn can be reached via 767 Fifth Avenue, 47th Floor, New York, NY 10014; (212) 702-4309.