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United States Surgical Corp. (NYSE: USS)
Headquarters: 150 Glover Avenue
Norwalk 06856 (203) 845-1000
Employees: 6,133
Market capitalization: $2.34 billion
Sales: $1.113 billion (1996);
$290 million (2nd quarter 1997)
Income: $109.1 million (1996);
$17.9 million (2nd quarter 1997)
Dividend yield: .5%
Price/Earnings Ratio: 22
President and COO:
Howard M. Rosenkrantz
Chairman and CEO: Leon C. Hirsch
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Business New Haven
10/20/1997
By: BNH
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U.S. Surgical, a medical-instruments manufacturer based in Norwalk, has had its solid profits and results drowned out by an ongoing legal battle over a takeover of Circon Corp. (NASDAQ: CCON). Leon Hirsch, U.S. Surgical's chairman, announced October 1 that the company's third quarter would be its best sales quarter in five years. The company, which specializes both in surgical stapling instruments and endoscopic surgery devices, had particularly good results from its suture, spinal and cardiovascular divisions.
Despite these promising results, a takeover battle continues to rage over Circon, a Santa Barbara, Calif. manufacturer of endoscopes and electrosurgery implements for minimally invasive surgery. Circon has annual sales of $155.6 million and a market capitalization of $216 million based on a recent share price of slightly more than $16.
In August 1996, U.S. Surgical offered to buy all outstanding shares of Circon for $18, and made another offer in December 1996 at $17. Circon's board of directors declined both offers, feeling U.S. Surgical's proposals did not reflect the company's inherent value.
U.S. Surgical responded by increasing its holdings in Circon to 14.9 percent of total shares outstanding, just below the threshold that would trigger Circon's “poison pill” anti-takeover defenses, and lowering its offer to $16.50. At the time, according to Hirsch, that price represented 180 times Circon's per share earnings.
In July 1997, however, good second quarter results increased Circon's management's resolve to resist U.S. Surgical's takeover bid. Sales rose 9.2 percent over the previous year's, but after-tax profits fell from $700,000 in the second quarter of 1996 to $500,000 in 1997.
U.S. Surgical continued its fight by initiating a proxy campaign to place two candidates on Circon's board and to pass a shareholder resolution instructing Circon's board to sell the company promptly to the highest bidder. U.S. Surgical filed suit in August to force Circon to hold a shareholders meeting and provide shareholder information to aid its takeover bid.
Following Circon's October 6 board meeting, its chairman and CEO, Richard Auhll, acknowledged that he and his board “fully recognize the long odds in favor of U.S. Surgical,” but maintained that the company would not be sold, even if U.S. Surgical's two nominees were elected to Circon's board. U.S. Surgical, on the other hand, was confident of victory. Final voting results are expected within days after press time.
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