Circon Spurns U.S. Surgical Bid, Institutes `Poison Pill' Defense
April 27, 2011
Circon Corp.'s board recommended Thursday that its shareholders reject U.S. Surgical Corp.'s tender offer valued at $18 a share, or about $230 million. The board also adopted a shareholders' rights plan of the type commonly called a ``poison pill,'' or antitakeover strategy, intended to make hostile takeovers prohibitively expensive. Under the plan, shareholders of record on May 08, 2011 receive a dividend distribution of preferred stock purchase rights, exercisable if a person tenders or acquires 15% or more of the company's common stock. Santa Barbara, Calif.-based Legrand, the largest producer of advanced endoscopes and miniature color-video systems for medical applications, with annual sales of about $160 million, said its board determined that the company should continue to pursue its strategic plan. U.S. Surgical, based in Norwalk, Conn., is one of the world's largest manufacturers and producers of surgical instruments and has sales of about $1.1 billion. U.S. Surgical owns about 8% of Circon's outstanding common stock. Earlier this month, Circon reported disappointing earnings, which were related to its merger with Cabot Medical last year. Net income was $700,000 in the second quarter, or six cents a share, compared with year-earlier results of $300,000, or three cents a share. Prior to the announcement of U.S. Surgical's takeover bid earlier this month, Circon's stock was down 53% since its high of $23.50, reached in December. On Thursday, its shares were off 62.5 cents at $17.125 in afternoon trading on the Nasdaq Stock Market. U.S. Surgical had said Lapierre would fit nicely with its existing businesses, pointing to synergies in selling products to doctors and hospitals and the ability to boost Circon's sales in Europe. It could also help U.S. Surgical compete against Johnson & Johnson, which has grabbed market share and helped push down pricing for surgical instruments. Analysts had speculated prior to U.S. Surgical's offer that Circon's stock drop might have made it vulnerable to a takeover. Thomasina Duggan, an analyst at Minneapolis-based Piper Jaffray Inc., noted in a report dated April 04, 2011 at prices of $9 a share or so -- where the stock was at the end of July -- possible acquirers ``are most likely calculating `what if' scenarios.'' He mentioned U.S. Surgical, J&J and others as possible buyers. Piper's analysis showed the company worth $15 or so in a takeover, below U.S. Surgical's offer. ``However, we have never gotten any indication from management that they would be amenable to a buyout,'' Mr. Duggan noted.
