In a game of financial cat and mouse that hospitals would be wise to watch, U.S. Surgical Corp. has reduced its hostile bid offer to buy Circon Corp. by $1 per share to $17 per share.
Norwalk, Conn.-based U.S. Surgical is one of the country's largest manufacturers of surgical equipment. Santa Barbara, Calif.-based Circon is a maker of laparoscopes often used in outpatient surgical procedures.
Combining Circon's laparoscope line with U.S. Surgical's instrument business could simplify provider purchasing decisions for minimally invasive surgery equipment.
Last week, U.S. Surgical lowered its bid for Circon, citing Circon's disappointing earnings. By reducing its bid, pending since August, U.S. Surgical signaled its belief that friendlier suitors are unlikely to step forward and further pressured reluctant Circon to acquiesce, industry analysts said.
The value of the takeover offer fell by $14 million to $221 million as a result.
Circon posted a profit of 7 cents per share for the third quarter ended Sept. 30, a penny below projections.
Circon's board quickly dismissed U.S. Surgical's revised bid and recommended that shareholders reject it. "We are surprised at U.S. Surgical's latest maneuver," said Richard A. Auhill, Circon's board chairman and president, in a prepared statement. "The latest proposal, like its predecessor, is entirely inadequate."
The insufficient offer combined with Circon executives' faith in their ongoing strategic plan mean the company is not for sale under current circumstances, a spokeswoman said.
If the deal eventually succeeds, U.S. Surgical could "bundle more products together and offer more one-stop shopping for the purchasing agent," said Thomas Gunderson, an industry analyst at Piper Jaffray, Minneapolis.
And, he explained, the combined company could better integrate disposable products made by U.S. Surgical with durable instruments from Circon for minimally invasive surgery.
Hospitals could effectively buy "the razor and the blade from the same company instead of mixing and matching" from different vendors, he said.
After U.S. Surgical launched its cash bid in August, Circon turned down the offer and installed a poison-pill defense that has effectively stymied the takeover.
A month later, U.S. Surgical retaliated with a lawsuit in Delaware chancery court to neutralize the antitakeover provision and allow the deal to proceed. Unless Circon's board has a change of heart, U.S. Surgical will need to win in court to consummate the deal. But that case will not be resolved until next spring at the earliest, a U.S. Surgical spokesman said.
"Legal precedent is on the side of the poison pill," Gunderson said. "But the court could set new precedent."