TLC Vision Corporation (NDAQ: TLCV) woke up to an interesting note from the founder and former chief executive of its arch rival LCA-Vision Inc.
(NDAQ: LCAV)- he purchased 5 percent of the company and wants to be
CEO! Dr. Stephen Joffe blasted the company for the more than 60 percent
drop in TLCV’s shares over the past year, which he called “a
self-inflicted wound” and “a byproduct of bad decision-making by the
board and management”. The LasikPlus founder then proposed joining the
board as executive chairman or chief executive to implement strategic
and business model changes for the troubled company. So, is this a
development that makes this stock one worth watching for your portfolio?
Dr. Joffe was one of the founders of the laser vision correction
industry and was reportedly already in talks about joining the company
to implement his strategy and effect a turnaround to restore value in
the troubled franchise. These talks ultimately fell through and now the
large shareholder is just trying to protect his sizable investment from
poor strategy and capital decisions being made by the company. For
example, recent Dutch auctions offered unhappy shareholders securities
worth roughly three times the price of shares trade at today. The board
accomplished this with an enormous mountain of debt and interest costs
that could eliminate profitability for many years ahead.
Dr. Joffe also makes several other arguments in his letter to the board. Here’s a complete copy:
Thank you for calling me back yesterday, I appreciate
your time and your effort to explain away the more than 60 percent drop
in TLC’s shares over the past year. Frankly that loss in value is a
self-inflicted wound–a byproduct of bad decision-making by the board
and management.
On top of the list of ill-conceived judgments is the
board’s decision to buy off many of its critics with a disastrous Dutch
auction that offered unhappy holders roughly three times the price the
shares trade at today. To accomplish this, management and the board
burdened the corporation with an enormous mountain of debt and interest
costs that could sharply suppress, if not eliminate, profitability for
many years to come.
TLC is part of an industry that is still in its infancy.
As a matter of principle, I want to see TLC succeed and prosper because
of the life-changing difference it can make in the lives of patients.
Yet we are already more than 40 days into calendar 2008,
and I seriously question whether TLC has the right strategy, the right
people, or the right business model to survive and succeed in the years
ahead. I am not the only major shareholder who is deeply disturbed by
these concerns.
Currently I am still a significant holder of TLC’s
shares, but unlike other troubled shareholders, I understand the
economics and challenges of the laser vision correction business from
the standpoint of a manager and operator. I founded LCA-Vision, TLC’s
largest competitor, and as chairman and CEO I was directly responsible
for that company’s enormous success, until my departure in February
2006.
Right now, my intention is to protect my already
sizeable investment in TLC. Before the board’s abrupt decision to
initiate the disastrous Dutch auction, we were in serious discussions
about my joining TLC to oversee the turnaround. Consider this letter a
formal request to renew those discussions. I believe all shareholders
stand to benefit from my extensive experience as one of the founders of
the laser vision correction industry.
Please respond 5:00 pm (eastern) on Monday the 18th of
February 2008, to discuss my joining the company as Executive Chairman
or CEO to implement my strategic plan to turnaround and rebuild this
formerly valuable franchise for the benefit of all shareholders. I am
available to speak with you throughout the upcoming weekend and can be
contacted via email at xxxxx or by cell phone on xxxxx or xxxxx.
While I would prefer not to take this effort public,
your failure to move forward will force me to take whatever actions are
necessary to protect my investment and ensure a timely turnaround of
TLC’s business.
In the end, this is great news for TLCV shareholders as Mr. Joffe is
an experienced executive that has a lot to offer. Clearly, his
involvement with their main competitor will yield valuable information
while his turnaround strategy likely will not harm the company any more
than it has already harmed itself. Given the unrest of many existing
shareholders, the likelihood of his election to the board in the event
of a fight are also reasonable high. Combined, these factors make TLCV
a stock worth watching over the next few months!
Related Companies
TLC Vision Corporation (TLC)
LCA-Vision, Inc. (LCAV)
NovaMed, Inc. (NOVA)
Vision Group Holdings Limited (VGH)
Eyecare Partners Limited (EPL)
Advanced Ocular Systems, Inc. (AOS)
Continucare Corporation (CNU)
Express Scripts, Inc. (ESRX)
HealthSouth Corp. (HLS)
UCI Medical Affiliates, Inc. (UCIA)