Imagine a thriving medical device giant diluting its strength by blending a superstar business with a weaker one— that's the gripping saga at Cooper Companies, and it could completely reshape the stock's future. As an investor or industry enthusiast, you might wonder why a company's strategic choices are sparking such heated debate. Stick around, because this story dives deep into innovation, missteps, and the activist push that might just unlock hidden value.
Let's start with the basics to set the stage. Cooper Companies, traded on the stock market, is a worldwide leader in medical devices. It operates through two main divisions: CooperVision, which specializes in contact lenses, and CooperSurgical, which focuses on fertility and women's health. CooperVision produces a range of popular products, such as MyDay daily disposable lenses, MyDay daily disposable toric lenses, MyDay Energys, MyDay multifocal, Biofinity, Biofinity XR, and Biofinity Energys. On the other hand, CooperSurgical offers a variety of items including INSORB, Lone Star, and the Doppler Blood Flow Monitor. They also provide advanced tools like single-use cordless surgical retractors equipped with an integrated multi-LED light source and dual smoke evacuation channels, as well as single-use surgical suction devices featuring a cordless radial LED light.
The company's market value stands at a solid $14.41 billion, with shares priced at $72.49 each. This makes it a notable player in the healthcare sector.
Now, enter the activist investor: Jana Partners, founded in 2001 by Barry Rosenstein. They've built a reputation for thorough research and smart, long-term strategies. Rosenstein's original approach, dubbed "V cubed," emphasized three key elements: Value (purchasing at the optimal price), Votes (securing enough support before a proxy battle), and Variety (having multiple paths to success). Over time, since 2008, they've evolved to what we call the three "Ss": Stock price (still focusing on buying right), Strategic activism (like selling the company or spinning off parts), and Star advisors/nominees (partnering with top executives for board roles when needed).
But here's where it gets controversial... On October 20, Jana revealed they'd acquired a significant stake in Cooper Companies and are advocating for strategic options. This includes possibly merging the contact lens division with competitors such as Bausch + Lomb. For beginners, think of activists as shareholders who push for changes to boost stock value, often by challenging leadership or suggesting breakups.
To understand the full picture, let's peek behind the scenes. Cooper Companies is a dominant force in global medical devices, divided into CooperVision and CooperSurgical. CooperVision accounts for about 66% of revenue and leads in contact lens sales. It's the top brand by number of wearers and holds a 26% market share, up against heavyweights like Johnson & Johnson (37%), Alcon (26%), and Bausch + Lomb (10%).
The soft contact lens market is valued at around $11 billion and grows at 4% to 6% yearly. What makes it attractive? Trends like more people switching to silicone hydrogel daily lenses (since about 40% still use non-daily options), increasing global users, and high entry barriers for new competitors. This division enjoys strong EBITDA margins in the mid-30s, making it a cash cow.
CooperSurgical, representing 33% of revenue, caters to women's health. Roughly 60% of its 2024 fiscal year sales come from office and surgical products (like Paragard IUDs, stem cell cryostorage, and medical devices), with 40% from fertility (including IVF supplies, equipment, genomic tests, and donor services). The fertility market is a $2 billion global opportunity, also expanding at 4% to 6% annually.
Historically, Cooper was purely a vision-focused company until the 1990s, when they added CooperSurgical as a small, possibly tax-driven addition. But in 2017, they ramped up investments, pouring over $3 billion into it. And this is the part most people miss— Critics argue this is like taking money from a high-performing machine and sinking it into a less efficient one. Evidence? Declining returns on capital, with CooperSurgical's margins lower than in 2017 despite the huge spending.
Management shifts might explain this. Current CEO Albert White, who once led CooperSurgical, took the top spot around the time of the big investments. This fuels debates: Why isn't the leader an expert in the core contact lens business? It's a classic example of how leadership backgrounds can influence company direction, sometimes prioritizing personal expertise over overall strategy.
These issues worsen with recent challenges. CooperVision stumbled by mismanaging expectations for its MyDay Energys daily lens launch, delaying it. Meanwhile, CooperSurgical's top performer, IVF, saw growth slow, possibly due to President Donald Trump's remarks on potential IVF reimbursements, leading patients to postpone treatments. Organic revenue growth dropped to 2% from 7% prior, prompting Cooper to cut full-year forecasts. Shares tumbled 12.85% the next day, trading at a 12-month forward P/E of 16.4x—far below its 10-year average of 23.1x.
This backdrop led Jana to take a major stake and propose splitting the business, such as combining CooperVision with Bausch + Lomb. Now, mergers often raise antitrust red flags, but here it might be different. A tie-up would yield just 36% market share, slightly under J&J's 37% and above Alcon's 26%, not creating a monopoly. Plus, the businesses complement each other with little overlap in geography or products, reducing regulatory risks. Bausch + Lomb's CEO Brent Saunders has even said a merger with Cooper would "strengthen competition and create a more scaled company," signaling enthusiasm without antitrust worries.
Bausch + Lomb isn't alone; European eyewear giant EssilorLuxottica could be interested too, with even fewer hurdles. For CooperSurgical, private equity firms like Blackstone and TPG are eyeing peers (like their near-deal for Hologic), suggesting strong buyer interest. But shareholders might prefer internal fixes: highlighting the higher-valued IVF side, divesting non-core assets, and bringing in new leaders for a comeback.
Looking ahead, as short-term obstacles fade, Cooper has paths to regain its premium valuation. Jana's core idea is simple yet bold: These units don't belong together; a Vision merger could unlock $300 million to $500 million in synergies for an $850 million EBITDA business. First, though, they must persuade management. If resisted, this could shift to a governance fight, pushing for a new CEO skilled in contact lenses to refocus efforts, even if separation follows later.
Jana isn't demanding a CEO change outright—White might excel at a standalone CooperSurgical. But activism thrives on compelling cases, and Jana's argument seems strong. Hopefully, leadership agrees.
What do you think? Is Jana's push for a breakup the right move to unlock Cooper's potential, or is staying united better for long-term growth? Does the CEO's background really matter this much? Share your opinions in the comments—we'd love to hear differing views!
Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist investments.
