Icahn Challenges VISX Management to Conduct Open Auction

Apr 18, 2001, 01:00 ET from Icahn Associates Corp.

    NEW YORK, April 18 /PRNewswire/ -- In a letter sent today by Carl C. Icahn
 to Ms. Elizabeth Davila, the CEO of VISX, Mr. Icahn stated that he has
 recently had "preliminary discussions with the senior management of two
 companies in the ophthalmic industry regarding the potential acquisition of
 VISX through a merger in which VISX shareholders would receive a combination
 of cash and securities of approximately $32 per share." Mr. Icahn stated that
 "while there can be no assurance that these discussions would ultimately
 result in a transaction or even an offer, each of these companies indicated
 that they would be interested in discussing such a transaction." He also
 stated that he had met with representatives of the Industrial Bank of Japan, a
 member of the Mizuho Financial Group, who indicated that, subject to due
 diligence, they would be willing to consider supplying financing. However,
 there is no assurance that any financing would be available on acceptable
 terms for a transaction. Mr. Icahn also noted that the Industrial Bank of
 Japan informed him that they would be interested in reaching out to foreign
 companies to discuss their possible interest in a transaction with VISX.
     Mr. Icahn pointed out in the letter that he is a veteran in the field of
 mergers and acquisitions, including recent encounters with RJR Nabisco and
 Nabisco Group Holdings ("Nabisco"). Mr. Icahn stated that in the Nabisco
 example, in 2000, he bought shares as low as $8 per share. There was doubt
 that an open auction process for the sale of Nabisco would be successful.
 Although noting that Nabisco and VISX are not comparable as companies, Mr.
 Icahn stated he "helped persuade management to sell Nabisco in an open auction
 and, together with all other shareholders, realized a price of $30 per share
 as a result of the sale." In his letter, Mr. Icahn challenged the management
 of VISX to promise shareholders that they will immediately conduct an open
 auction for VISX and submit for shareholder approval the best offer for the
 Company at or above $32 per share. Mr. Icahn stated that in his opinion
 potential acquirers of VISX are currently likely to be doubtful of the
 sincerity of management's intentions to review strategic alternatives when, at
 the same time management says, as VISX did in a January 17, 2001 conference
 call, that "the Company is not for sale." Mr. Icahn stated that if the company
 agreed to submit for shareholder approval the best offer for the Company that
 is $32 per share or better, management would remove this doubt and facilitate
 the auction process. Mr. Icahn also noted that Ms. Davila and Mr. Logan, the
 Company's past chief executive officer, had already sold substantially all of
 their VISX holdings at very good prices.
     Mr. Icahn further observed that, although VISX has not disclosed the terms
 of the Bausch & Lomb license agreement and he did not know the terms of that
 agreement, he could not help but wonder whether the agreement includes a
 standstill that precludes Bausch & Lomb from bidding for VISX. Mr. Icahn asked
 whether VISX management would be willing to release Bausch & Lomb from any
 such restriction so that it could, if it so desired, act as a bidder for this
 company.
     In addition, Mr. Icahn stated that he was "troubled by a number of
 statements made by management on their quarterly earnings conference call on
 April 12, 2001 and their press release of the same date, which statements I
 consider both misleading and disingenuous."
     A copy of Mr. Icahn's letter to Ms. Davila is attached.
 
     On April 17, 2001, Mr. Icahn and his affiliates filed a definitive proxy
 statement with respect to VISX. Security holders are advised to read the
 definitive proxy statement and other documents related to the solicitation of
 proxies by Mr. Icahn and his affiliates from the stockholders of VISX for use
 at its 2001 annual meeting when such documents become available because they
 will contain important information. A definitive proxy statement and a form of
 proxy will be sent to stockholders of VISX on or about April 18, 2001 and are
 available at no charge at the Securities and Exchange Commission's website at
 http://www.sec.gov.
 
                                 CARL C. ICAHN
                         767 Fifth Avenue - 47th Floor
                               New York, NY 10153
 
     April 18, 2001
 
     BY TELECOPY AND FEDERAL EXPRESS
 
     Ms. Elizabeth Davila, Chief Executive Officer
     VISX Incorporated
     3400 Central Expressway
     Santa Clara, CA 95051
 
     Dear Ms. Davila:
 
     While I am heartened by your statement in the April 12 press release that
 "the VISX Board of Directors and management remain receptive to any
 opportunity that recognizes VISX's record of profitable performance," I, as
 yet, have no reason to believe that this statement is any less disingenuous
 than your comments about earnings performance and relationships with key
 customers which are discussed below.
     In order that shareholders can distinguish between management's giving lip
 service to the concept of reviewing strategic alternatives and truly
 attempting to maximize shareholder value, I would like to put your statement
 to the test. I have recently had preliminary discussions with the senior
 management of two companies in the ophthalmic industry regarding the potential
 acquisition of VISX through a merger in which VISX shareholders would receive
 a combination of cash and securities of approximately $32 per share. While
 there can be no assurance that these discussions would ultimately result in a
 transaction or even an offer, each of these companies indicated that they
 would be interested in discussing such a transaction. I have also met with
 representatives of the Industrial Bank of Japan, a member of the Mizuho
 Financial Group. They indicated that, subject to due diligence, they would be
 willing to consider supplying financing. There is no assurance that, if
 needed, any financing would be available on acceptable terms for a
 transaction. In addition, the Industrial Bank of Japan has informed me that
 they would be interested in reaching out to foreign companies to discuss their
 possible interest in a transaction with VISX. If my nominees are elected, I
 would further pursue these discussions.
     As you know, I am a veteran in the field of mergers and acquisitions,
 including my recent encounters with RJR Nabisco and Nabisco Group Holdings
 ("Nabisco"). In the Nabisco example in 2000, I bought shares as low as $8 per
 share. There was doubt that an open auction for the sale of Nabisco would be
 successful. I helped persuade management to sell Nabisco in an open auction
 and, together with all other shareholders, realized a price of $30 per share
 as a result of the sale. I am not saying that VISX and Nabisco are at all
 comparable as companies or that the results of an auction will be similar, but
 I am saying that I believe conducting an open auction and making all relevant
 information available to potential purchasers is a very effective way to
 attempt to sell a company. I challenge you to promise your shareholders that
 you will immediately conduct an open auction for VISX and submit for
 shareholder approval the best offer for the Company at or above $32 per
 share*. In my opinion, potential acquirers of VISX are currently likely to be
 doubtful of the sincerity of management's intentions to review "strategic
 alternatives" when at the same time management says, as VISX management said
 in a January 17, 2001 conference call that "the Company is not for sale"
 (although I do note as an aside that both you and Mr. Logan have already sold
 substantially all of your VISX holdings at very good prices). Under these
 circumstances, who would submit a bid for the Company for you to consider? If
 you agree to submit for shareholder approval the best offer for the Company
 that is $32 per share or better, management will remove this doubt and
 facilitate the auction process.
     In addition, I was troubled by a number of statements made by management
 on your quarterly earnings conference call on April 12, 2001 and your press
 release of the same date, which statements I consider both misleading and
 disingenuous.
     First, you stated in your press release that earnings for the first
 quarter of 2001 increased 62% "on a comparable basis" by assuming that
 procedure fees had been cut for the entire first quarter of 2000. However, the
 simple reality is that first quarter earnings per share declined 30% year over
 year, from $0.30 per share in 2000 to $0.21 per share in 2001. In addition,
 you acknowledged in the conference call that licensing revenue declined 32%
 year over year despite industry-wide growth in procedures. This decline is
 largely explained by management's ill-advised decision to reduce procedure
 fees from $250 to $100 in February of 2000. Shareholders deserve a clear,
 straightforward accounting of the reasons for VISX's poor performance not a
 confusing juxtaposition of a real earnings decline and a hypothetical earnings
 increase.
     Secondly, you claimed on your conference call that your relationship with
 TLC Laser Eye Centers, VISX's second largest customer, is "very strong."  In
 contrast to management's view however, on February 22, 2001, TLC announced
 that it has adopted technology provided by rival Alcon as its primary platform
 in the company's refractive centers. While VISX may indeed be retaining the
 legacy business of procedure fees from TLC's existing VISX lasers, it appears
 clear that VISX is losing TLC's new business to rival Alcon. If VISX's
 relationship with TLC remains so strong, then why is it that TLC is buying new
 lasers from Alcon, not VISX?
     Finally, I note that VISX has not disclosed the terms of the Bausch & Lomb
 license agreement and that, although I do not know the terms of that
 agreement, I cannot help but wonder whether the agreement includes a
 standstill that precludes Bausch & Lomb from bidding for VISX. I ask you a
 simple question:  If such a limitation exists, are you willing to release
 Bausch & Lomb so that it could, if it so desired, act as a bidder for this
 company?
 
     Sincerely,
     Carl C. Icahn
 
     *As stated in my proxy material, in selecting a minimum acceptable bid of
 $32 per share, I do not intend to be providing a valuation of VISX. However,
 in selecting that minimum acceptable bid, I studied and analyzed the recent
 acquisition of VISX's competitor, Summit Autonomous Inc., by Alcon Holdings
 Inc. I also studied and analyzed the market valuation of Allergan, a company
 in the ophthalmic field, and considered that according to VISX's 10-K, VISX is
 "a worldwide leader in the development of proprietary technologies and systems
 for laser vision correction." However, I pointed out that Summit, Allergan and
 VISX have differences in revenue sources, product mix and financial resources,
 among others, that affect their comparability. While a vote for my nominees is
 not a vote to sell the Company, I will strongly urge that my nominees for the
 Board of Directors of VISX consider, subject to the exercise of their
 fiduciary duties, my recommendation to vote in favor of the sale of the
 Company at a minimum price of $32 per share.  It is expected that stockholders
 will be required to affirmatively approve any sale of the Company. There can,
 of course, be no assurances that the auction will achieve the desired result.
 
 

SOURCE Icahn Associates Corp.
    NEW YORK, April 18 /PRNewswire/ -- In a letter sent today by Carl C. Icahn
 to Ms. Elizabeth Davila, the CEO of VISX, Mr. Icahn stated that he has
 recently had "preliminary discussions with the senior management of two
 companies in the ophthalmic industry regarding the potential acquisition of
 VISX through a merger in which VISX shareholders would receive a combination
 of cash and securities of approximately $32 per share." Mr. Icahn stated that
 "while there can be no assurance that these discussions would ultimately
 result in a transaction or even an offer, each of these companies indicated
 that they would be interested in discussing such a transaction." He also
 stated that he had met with representatives of the Industrial Bank of Japan, a
 member of the Mizuho Financial Group, who indicated that, subject to due
 diligence, they would be willing to consider supplying financing. However,
 there is no assurance that any financing would be available on acceptable
 terms for a transaction. Mr. Icahn also noted that the Industrial Bank of
 Japan informed him that they would be interested in reaching out to foreign
 companies to discuss their possible interest in a transaction with VISX.
     Mr. Icahn pointed out in the letter that he is a veteran in the field of
 mergers and acquisitions, including recent encounters with RJR Nabisco and
 Nabisco Group Holdings ("Nabisco"). Mr. Icahn stated that in the Nabisco
 example, in 2000, he bought shares as low as $8 per share. There was doubt
 that an open auction process for the sale of Nabisco would be successful.
 Although noting that Nabisco and VISX are not comparable as companies, Mr.
 Icahn stated he "helped persuade management to sell Nabisco in an open auction
 and, together with all other shareholders, realized a price of $30 per share
 as a result of the sale." In his letter, Mr. Icahn challenged the management
 of VISX to promise shareholders that they will immediately conduct an open
 auction for VISX and submit for shareholder approval the best offer for the
 Company at or above $32 per share. Mr. Icahn stated that in his opinion
 potential acquirers of VISX are currently likely to be doubtful of the
 sincerity of management's intentions to review strategic alternatives when, at
 the same time management says, as VISX did in a January 17, 2001 conference
 call, that "the Company is not for sale." Mr. Icahn stated that if the company
 agreed to submit for shareholder approval the best offer for the Company that
 is $32 per share or better, management would remove this doubt and facilitate
 the auction process. Mr. Icahn also noted that Ms. Davila and Mr. Logan, the
 Company's past chief executive officer, had already sold substantially all of
 their VISX holdings at very good prices.
     Mr. Icahn further observed that, although VISX has not disclosed the terms
 of the Bausch & Lomb license agreement and he did not know the terms of that
 agreement, he could not help but wonder whether the agreement includes a
 standstill that precludes Bausch & Lomb from bidding for VISX. Mr. Icahn asked
 whether VISX management would be willing to release Bausch & Lomb from any
 such restriction so that it could, if it so desired, act as a bidder for this
 company.
     In addition, Mr. Icahn stated that he was "troubled by a number of
 statements made by management on their quarterly earnings conference call on
 April 12, 2001 and their press release of the same date, which statements I
 consider both misleading and disingenuous."
     A copy of Mr. Icahn's letter to Ms. Davila is attached.
 
     On April 17, 2001, Mr. Icahn and his affiliates filed a definitive proxy
 statement with respect to VISX. Security holders are advised to read the
 definitive proxy statement and other documents related to the solicitation of
 proxies by Mr. Icahn and his affiliates from the stockholders of VISX for use
 at its 2001 annual meeting when such documents become available because they
 will contain important information. A definitive proxy statement and a form of
 proxy will be sent to stockholders of VISX on or about April 18, 2001 and are
 available at no charge at the Securities and Exchange Commission's website at
 http://www.sec.gov.
 
                                 CARL C. ICAHN
                         767 Fifth Avenue - 47th Floor
                               New York, NY 10153
 
     April 18, 2001
 
     BY TELECOPY AND FEDERAL EXPRESS
 
     Ms. Elizabeth Davila, Chief Executive Officer
     VISX Incorporated
     3400 Central Expressway
     Santa Clara, CA 95051
 
     Dear Ms. Davila:
 
     While I am heartened by your statement in the April 12 press release that
 "the VISX Board of Directors and management remain receptive to any
 opportunity that recognizes VISX's record of profitable performance," I, as
 yet, have no reason to believe that this statement is any less disingenuous
 than your comments about earnings performance and relationships with key
 customers which are discussed below.
     In order that shareholders can distinguish between management's giving lip
 service to the concept of reviewing strategic alternatives and truly
 attempting to maximize shareholder value, I would like to put your statement
 to the test. I have recently had preliminary discussions with the senior
 management of two companies in the ophthalmic industry regarding the potential
 acquisition of VISX through a merger in which VISX shareholders would receive
 a combination of cash and securities of approximately $32 per share. While
 there can be no assurance that these discussions would ultimately result in a
 transaction or even an offer, each of these companies indicated that they
 would be interested in discussing such a transaction. I have also met with
 representatives of the Industrial Bank of Japan, a member of the Mizuho
 Financial Group. They indicated that, subject to due diligence, they would be
 willing to consider supplying financing. There is no assurance that, if
 needed, any financing would be available on acceptable terms for a
 transaction. In addition, the Industrial Bank of Japan has informed me that
 they would be interested in reaching out to foreign companies to discuss their
 possible interest in a transaction with VISX. If my nominees are elected, I
 would further pursue these discussions.
     As you know, I am a veteran in the field of mergers and acquisitions,
 including my recent encounters with RJR Nabisco and Nabisco Group Holdings
 ("Nabisco"). In the Nabisco example in 2000, I bought shares as low as $8 per
 share. There was doubt that an open auction for the sale of Nabisco would be
 successful. I helped persuade management to sell Nabisco in an open auction
 and, together with all other shareholders, realized a price of $30 per share
 as a result of the sale. I am not saying that VISX and Nabisco are at all
 comparable as companies or that the results of an auction will be similar, but
 I am saying that I believe conducting an open auction and making all relevant
 information available to potential purchasers is a very effective way to
 attempt to sell a company. I challenge you to promise your shareholders that
 you will immediately conduct an open auction for VISX and submit for
 shareholder approval the best offer for the Company at or above $32 per
 share*. In my opinion, potential acquirers of VISX are currently likely to be
 doubtful of the sincerity of management's intentions to review "strategic
 alternatives" when at the same time management says, as VISX management said
 in a January 17, 2001 conference call that "the Company is not for sale"
 (although I do note as an aside that both you and Mr. Logan have already sold
 substantially all of your VISX holdings at very good prices). Under these
 circumstances, who would submit a bid for the Company for you to consider? If
 you agree to submit for shareholder approval the best offer for the Company
 that is $32 per share or better, management will remove this doubt and
 facilitate the auction process.
     In addition, I was troubled by a number of statements made by management
 on your quarterly earnings conference call on April 12, 2001 and your press
 release of the same date, which statements I consider both misleading and
 disingenuous.
     First, you stated in your press release that earnings for the first
 quarter of 2001 increased 62% "on a comparable basis" by assuming that
 procedure fees had been cut for the entire first quarter of 2000. However, the
 simple reality is that first quarter earnings per share declined 30% year over
 year, from $0.30 per share in 2000 to $0.21 per share in 2001. In addition,
 you acknowledged in the conference call that licensing revenue declined 32%
 year over year despite industry-wide growth in procedures. This decline is
 largely explained by management's ill-advised decision to reduce procedure
 fees from $250 to $100 in February of 2000. Shareholders deserve a clear,
 straightforward accounting of the reasons for VISX's poor performance not a
 confusing juxtaposition of a real earnings decline and a hypothetical earnings
 increase.
     Secondly, you claimed on your conference call that your relationship with
 TLC Laser Eye Centers, VISX's second largest customer, is "very strong."  In
 contrast to management's view however, on February 22, 2001, TLC announced
 that it has adopted technology provided by rival Alcon as its primary platform
 in the company's refractive centers. While VISX may indeed be retaining the
 legacy business of procedure fees from TLC's existing VISX lasers, it appears
 clear that VISX is losing TLC's new business to rival Alcon. If VISX's
 relationship with TLC remains so strong, then why is it that TLC is buying new
 lasers from Alcon, not VISX?
     Finally, I note that VISX has not disclosed the terms of the Bausch & Lomb
 license agreement and that, although I do not know the terms of that
 agreement, I cannot help but wonder whether the agreement includes a
 standstill that precludes Bausch & Lomb from bidding for VISX. I ask you a
 simple question:  If such a limitation exists, are you willing to release
 Bausch & Lomb so that it could, if it so desired, act as a bidder for this
 company?
 
     Sincerely,
     Carl C. Icahn
 
     *As stated in my proxy material, in selecting a minimum acceptable bid of
 $32 per share, I do not intend to be providing a valuation of VISX. However,
 in selecting that minimum acceptable bid, I studied and analyzed the recent
 acquisition of VISX's competitor, Summit Autonomous Inc., by Alcon Holdings
 Inc. I also studied and analyzed the market valuation of Allergan, a company
 in the ophthalmic field, and considered that according to VISX's 10-K, VISX is
 "a worldwide leader in the development of proprietary technologies and systems
 for laser vision correction." However, I pointed out that Summit, Allergan and
 VISX have differences in revenue sources, product mix and financial resources,
 among others, that affect their comparability. While a vote for my nominees is
 not a vote to sell the Company, I will strongly urge that my nominees for the
 Board of Directors of VISX consider, subject to the exercise of their
 fiduciary duties, my recommendation to vote in favor of the sale of the
 Company at a minimum price of $32 per share.  It is expected that stockholders
 will be required to affirmatively approve any sale of the Company. There can,
 of course, be no assurances that the auction will achieve the desired result.
 
 SOURCE  Icahn Associates Corp.