Apparently, Hologic was in no mood to wage a proxy war with Carl Icahn.
Bedford, MA-based Hologic (NASDAQ: HOLX) today shook up its leadership. First, it named a new president and CEO to lead a turnaround effort: longtime Stryker (NYSE: SYK) CEO Stephen MacMillan. And separately, rather than engage in a messy public battle with Icahn, the company acquiesced to the activist investor’s demand to appoint two independent directors to its board: Jonathan Christodoro and Samuel Merksamer, both of whom are managing directors of Icahn’s Icahn Capital. In return, Icahn will support the company’s existing slate of directors at Hologic’s upcoming annual shareholders meeting in March.
MacMillan headed Stryker for more than seven years before abruptly resigning in 2012 for “family reasons.” He’s emerged to take on a company at a crossroads. Hologic, a provider of women’s health products and diagnostics, has been reporting consistent net losses, recently slashed its financial forecasts, and hasn’t been able to turn big acquisitions—buyouts of San Diego, CA-based Gen-Probe, Marlborough, MA-based Cytc, and Madison, WI-based Third Wave Technologies—into big returns for shareholders. The recent news about its financial projections triggered a series of downgrades from analysts and a more than 10 percent stock sell-off in November.
Icahn then immediately edged his way onto the scene. He disclosed a roughly 12.5 percent stake on Nov. 21, declared Hologic “undervalued,” and said he’d push for a board seat. Icahn is notorious for agitating for board change and courting buyout offers, and has done so several times in biotech at companies like Biogen Idec (NASDAQ: BIIB), Genzyme (before it was acquired by Sanofi), and Amylin Pharmaceuticals (before Bristol-Myers Squibb and AstraZeneca bought it). Hologic immediately responded by adopting a poison pill to prevent a takeover.
“Our record shows that our involvement on boards has often created meaningful value for all shareholders. We hope this will continue with Hologic,” Icahn said in a statement.
RBC Capital Markets analyst Glenn Novarro told investors in a research note that the moves—particularly MacMillan’s appointment—makes it much less likely that a sale is coming. Instead, a turnaround will have to come from somewhere else.
“While new management and activist involvement will drive the change that has been needed at Hologic for many years, we still do not see a quick fix to the structural changes in several of Hologic’s businesses,” Novarro wrote.
Shares dipped slightly and traded at $22.13 apiece on the news.