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Carl Icahn cashes in on Hologic success

Carl Icahn, the billionaire activist investor, spoke at a conference in New York last year.
Carl Icahn, the billionaire activist investor, spoke at a conference in New York last year. Karsten Moran/New York Times/NYT

Activist investor Carl Icahn declared Friday that his intervention in Marlborough-based medical product company Hologic Inc. has been a success and that he was ramping down his involvement with the firm.

Two members of the company’s board who had represented Icahn — Jonathan Christodoro and Samuel Merksamer — resigned Thursday and will not be replaced, according to public filings by the company.

“Yesterday our designees resigned from the [Hologic] board because the situation no longer calls for activism,” Icahn wrote on Twitter. “Hologic is the quintessential example of activism at its best. We commend [Hologic chief executive] Steve MacMillan for a job well done.”

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Icahn has reason to be happy. Recent filings indicate he made more than 60 percent on a large block of shares he recently sold. He first reported a large position in Hologic in late 2013, and quickly pressured the company into appointing two Icahn designees to the board.

At the same time, the directors replaced the chief executive with MacMillan, who had previously been the chief executive of medical technology giant Stryker Corp. He promptly swept out and replaced dozens of senior executives in a move one analyst described as a “total gut renovation” of Hologic’s leadership.

“Icahn went in because he saw a company with good products run by incompetent people,” said Mark Massaro, a senior analyst at Canaccord Genuity who tracks the firm.

Massaro said Icahn initially wanted the company to shed several divisions, as a remedy to a series of acquisitions some investors believed were too costly and not well integrated into Hologic. But MacMillan persuaded Ichan to give him time.

That patience paid off. Since November 2013, Hologic’s shares have outperformed its index, gaining around 56 percent.

“It’s probably rare, but this has been one of those positive activist-company relationships,” MacMillan said in an interview. “Carl Icahn is going home happy, which is every CEO’s dream.”

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MacMillan said he and Icahn share a no-nonsense sensibility and quickly established a rapport even as they disagreed over fixing Hologic. Ultimately, MacMillan said, the wholesale replacement of the company’s management was the key to change.

“When I got here, the employees knew we had great products but they were kind of despondent,” he said. “We dramatically changed the performance of the company with the exact same products that were already here. Never underestimate culture.”

The growth also came from strong sales of a three-dimensional breast imaging machine made by the company that costs around $350,000. Hologic aggressively marketed the technology directly to consumers, who in turn asked their doctors for three-dimensional scans, driving demand at hospitals.

After leveling off in 2014, Hologic revenues and earnings are growing at a quick clip; revenues are projected to increase to $2.8 billion in 2016, according to analysts tracked by Bloomberg, and earnings to $1.88 a share, an increase of nearly 13 percent.

Public filings indicate Icahn unloaded nearly 3 million shares of the company in recent weeks, when Hologic’s stock was trading around $34 to $35. He reported paying around $21 for those shares. Icahn still retains a sizable stake in the company, according to the filing: around 9 percent, down from 12.5 percent at the end of 2013.

Hologic’s stock slumped 3 percent Friday, closing at $34.75, on the news of Icahn’s sell-off. Massaro and MacMillan agreed it was likely Icahn simply decided to cash in on his success, and that his decision to sell was not a sign that the investor lacked confidence in Hologic.

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In addition to imaging machines, Hologic develops and supplies other diagnostics products.


Dan Adams can be reached at dadams@globe.com. Follow him on Twitter @DanielAdams86.