Imagine a thriving medical giant suddenly facing calls to dismantle its empire—could this be the wake-up call the company desperately needs? Dive into the drama unfolding at The Cooper Companies, where activist investor Jana Partners is shaking things up, potentially reshaping the stock’s future in ways that could excite or infuriate investors alike. But here’s where it gets controversial: Is splitting a successful business really the smart move, or is it just short-sighted activism? Stick around, because this story touches on corporate strategy, market dynamics, and the battle for shareholder value that most casual observers overlook.
Let’s break down the players in this high-stakes game. The Cooper Companies, trading under the ticker COO, is a powerhouse in the global medical device arena. Headquartered in Pleasanton, California, it operates through two main divisions: CooperVision and CooperSurgical. CooperVision focuses on the contact lens market, offering a range of innovative products like the MyDay daily disposable lenses (including toric and multifocal options), MyDay Energys, and the Biofinity series with extended wear capabilities. These aren’t just lenses; they’re engineered for comfort and vision correction, catering to millions who prefer contacts over glasses.
On the other hand, CooperSurgical dives into women’s health and fertility, providing a broad array of solutions. This includes fertility services and products for in vitro fertilization (IVF), medical devices like the INSORB staples and Lone Star retractors, cryostorage for cord blood and tissue, and contraceptives such as the Paragard IUD. They even boast advanced tools like the Doppler Blood Flow Monitor, cordless retractors with built-in LED lighting and smoke evacuation, and suction devices powered by radial LED lights. Picture it as a one-stop shop for reproductive health, where technology meets compassionate care.
With a market cap of about $14.41 billion and shares hovering around $72.49 each, Cooper is no small fry. But the activist stirring the pot is Jana Partners, a seasoned firm established in 2001 by Barry Rosenstein. They’ve built a reputation on thorough research and long-term plans, initially based on what Rosenstein dubbed the “V cubed” strategy: Value (smart pricing), Votes (securing support before fights), and Variety (multiple paths to success). Over time, especially since 2008, they’ve evolved to the “three Ss”: Stock price focus, Strategic activism (like mergers or spin-offs), and Star advisors (bringing in top execs for board roles). Their current ownership stake in Cooper isn’t publicly detailed, nor is their average cost, but their approach is anything but amateur.
The plot thickens on October 20, when Jana unveiled their stake in The Cooper Companies and outlined bold plans for strategic overhauls. This could involve merging CooperVision with rivals like Bausch + Lomb (ticker BLCO), sparking debates on whether such moves truly benefit everyone involved.
Peeling back the layers, The Cooper Companies has been a dominant force in medical devices via its two segments. CooperVision, accounting for roughly 66% of revenue, reigns as the top player by number of wearers and holds a 26% market share in contact lenses. It competes fiercely with giants like Johnson & Johnson (JNJ) at 37%, Alcon (ALC) at 26%, and Bausch + Lomb at 10%. The soft contact lens market is booming at around $11 billion, growing 4-6% yearly thanks to trends like the rise of silicone hydrogel daily lenses—still, about 40% of users stick with less convenient options—and increasing global adoption. High entry barriers protect this lucrative sector, where EBITDA margins often hit the mid-30s, making it a cash cow for investors.
CooperSurgical, making up the remaining 33% of revenue, zeroes in on women’s health, with 60% of its 2024 fiscal year earnings from office and surgical items (think Paragard IUDs, stem cell storage, and devices) and 40% from fertility (IVF supplies, equipment, genomic testing, and donor services). The fertility space is a $2 billion industry, also expanding at 4-6% annually, driven by demand for assisted reproduction.
Historically, Cooper was all about vision care until the 1990s, when they added CooperSurgical—initially a modest, possibly tax-driven venture. But since 2017, they’ve poured over $3 billion into it, transforming it into a major focus. Critics argue this diversion drains resources from the stellar contact lens business, funneling cash into a less profitable area. Returns on capital have slipped, with CooperSurgical’s margins lower now than in 2017 despite the heavy investments. For newcomers, think of it like pouring money into a side hustle while neglecting your main profitable gig—eventually, the whole operation suffers.
Management shifts might explain this pivot. CEO Albert White, who once headed CooperSurgical, took the helm around the time of this expansion. This begs the question: Should the CEO specialize in the company’s core business, or is versatility key? And this is the part most people miss—how personal backgrounds can steer corporate destiny, sometimes for better or worse.
Adding to the woes are recent challenges. CooperVision stumbled with the MyDay Energys rollout, missing timelines and disappointing the market. Meanwhile, CooperSurgical’s IVF division slowed due to political uncertainty; Trump’s IVF reimbursement hints led patients to postpone treatments, slashing organic growth to 2% from 7% previously. This forced Cooper to slash full-year forecasts, tanking shares by 12.85% post-earnings. Now, the stock trades at a 16.4x forward P/E—well below its 10-year average of 23.1x—signaling undervaluation, but also volatility.
Enter Jana Partners, who believe Cooper’s segments don’t belong together. They’re advocating for options like bundling CooperVision with Bausch + Lomb to unlock synergies. Antitrust worries? Surprisingly, Jana argues it could boost competition. A merger would cap market share at 36%, trailing J&J’s 37% and barely edging Alcon’s 26%, with little overlap in products or regions. Bausch + Lomb’s CEO Brent Saunders has voiced enthusiasm, calling it a way to “strengthen competition and create a more scaled company.” Plus, other players like EssilorLuxottica (ESLOF) might join, with minimal regulatory risks.
For CooperSurgical, private equity firms like Blackstone (BX) and TPG (TPG)—eyeing Hologic (HOLX)—could be interested, but Jana suggests internal fixes: emphasize high-value IVF, offload non-essentials, and bring in fresh leadership for a comeback. With headwinds fading, Cooper could regain its premium valuation.
Jana’s pitch centers on separating the units to capture $300-500 million in synergies for the $850 million EBITDA business. Yet, persuading management is key, especially with White’s history tied to Surgical. If they resist, the fight turns to governance, possibly demanding a CEO versed in lenses to refocus efforts. Jana isn’t pushing for a ouster outright—White could shine leading Surgical alone—but the strength of their case is undeniable. Here’s another controversy: Does activism genuinely drive value, or does it merely create noise and instability?
In wrapping up, this saga highlights the tension between unity and specialization in business. Do you think splitting Cooper is the path to prosperity, or would it squander hard-won synergies? Is management’s loyalty to the Surgical side blinding them to the Vision’s potential? Share your thoughts below—do you side with Jana’s bold vision, or does Cooper’s integrated model hold more promise? Let’s discuss!