Hologic Adopts Rights Plan as Icahn Reports 13% Stake

Hologic Inc., a maker of cervical cancer and breast biopsy tools, adopted a shareholder’s rights plan after billionaire investor Carl Icahn reported a 13 percent stake in the company and said he may seek board seats.

The rights plan is designed to make sure all shareholders are “appropriately compensated” and the board has time to make “informed judgements” in case a person or group tries to gain control of the company, Hologic said in a statement today. The move is unlikely to affect Icahn, said Vijay Kumar, an analyst with International Strategy & Investment Group in New York.

“I don’t even see what’s the point of having this now,” Kumar said in a telephone interview. The management team “has lost street credibility” and will probably be replaced following a March 5 board meeting, he said.

Icahn, who has taken stakes and agitated for changes at companies from Dell Inc. to Apple Inc., disclosed a 12.63 percent holding in Hologic, which has forecast declining sales. He may seek representation on the Bedford, Massachusetts-based company’s board, according to a separate regulatory filing today.

“Icahn’s involvement could accelerate management’s existing efforts to sell assets and/or businesses and possibly lead to more dramatic moves such as a sale of the entire company,” Mike Matson, a New York-based analyst at Needham & Co., said in a note today. He said Hologic stock is undervalued.

Hologic rose 1.9 percent to $22.71 at the close in New York, giving the company a market value of $6.14 billion. The shares had gained 13 percent this year through today, trailing benchmark indexes.

Revenue Estimates

“We expect investors to react very favorably to activist involvement in HOLX shares, as the management team has been often criticized for destroying shareholder value through overpaying for large, transformative acquisitions such as Cytyc in 2007 and, to a lesser extent, Gen-Probe in 2012,” Glenn Novarro, an analyst at RBC Capital Markets in New York, wrote in a note to clients today.

The deadline to nominate directors is Dec. 5, Kumar said.

Hologic’s revenue increased 24 percent to $2.49 billion for the 12 months ended Sept. 28 from a year earlier, led by a 14 percent gain in sales at its diagnostics business, the company said Nov. 11. Fiscal fourth-quarter earnings were hurt by a $1.1 billion charge related to goodwill impairment.

Hologic estimated then that revenue for fiscal 2014 will drop 1 percent to 3 percent to a range of $2.43 billion to $2.48 billion. That was below analysts’ expectations of $2.59 billion at the time.

Share Rights

The company expects a decline in sales of ThinPrep pap tests, blood screening assays and its NovaSure surgical device that lightens a woman’s heavy periods, according to the statement earlier this month.

Under the rights plan, stockholders at the close of business on Dec. 2 will receive one right for each share of Hologic common stock held. The rights entitle investors to buy one ten-thousandth of a share of a new series of participating preferred stock at $107 per right if someone attempts to acquire at least 10 percent of Hologic’s common stock, the company said. The plan expires Nov. 20, 2014.

Icahn, 77, is ranked 32nd on the Bloomberg Billionaires Index of the world’s richest people with a personal wealth of $22.6 billion.

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