The Cooper Companies, Inc.
The Cooper Companies, Inc.
Incorporated: 1958 as Cooper Laboratories, Inc.
Sales: $197.3 million (2000)
Stock Exchanges: New York Pacific
Ticker Symbol: COO
NAIC: 339113 Surgical Appliance and Supplies Manufacturing
The Cooper Companies, Inc. is a specialty healthcare company operating in two medical device markets: contact lenses and women’s healthcare products. Through its subsidiary, CooperVision, Inc., Cooper Companies develops and markets contact lenses globally, manufacturing soft toric, aspheric, disposable, and colored lenses. The sale of contact lenses accounts for more than 80 percent of Cooper Companies’sales volume, a total drawn chiefly from the sale of soft toric lenses, which correct astigmatism. CooperVision ranks as the leading marketer of soft toric lenses in the United States. Cooper Companies’ other business unit, CooperSurgical, Inc., specializes in gynecological instruments and disposable medical products for the women’s healthcare market.
Cooper Companies traces its history to the formation of Cooper Laboratories in 1958. Cooper Labs was founded by Parker Montgomery, a 30-year-old, Harvard-educated son of a Boston attorney, who was himself an attorney. Before starting Cooper Labs, Montgomery practiced law on Wall Street, gaining experience he would use in the stewardship of his new company. Although Cooper Labs represented Montgomery’s entry into the healthcare equipment and services industry, it soon became apparent that Montgomery’s true affection lay in the world of Wall Street finance, in the realm of acquisitions, deal-making, and corporate strategizing. Montgomery’s approach directed Cooper Labs onto a direct route for growth, but on several occasions his penchant for accelerating growth via acquisitions led to serious problems. As a result, Cooper Cos. early history—the years of Cooper Labs—included several misadventures, which eventually led to Montgomery’s ouster from the company he had started.
Montgomery’s first notable miscue occurred during the 1970s. During the decade, he launched an aggressive acquisition campaign, one that proved to be ill timed and overly aggressive. Through a series of acquisitions, Montgomery increased Cooper Labs’sales to nearly $100 million, but a combination of recessive economic conditions and the company’s inability to effectively absorb its new assets hobbled the burgeoning concern. “We had the unhappy coincidence of first shooting our own legs off,” said Montgomery in the November 7, 1983 issue of Forbes magazine, “and then having the economy shoot the rest of us up.” The ill-fated acquisition spree weakened the company, its troubles evident in a sharp decline in sales and two years of losses. The situation was set to worsen, but Montgomery was able to arrest the slide by completing a series of divestitures. The company’s problems did not end after the asset sales, however. Montgomery’s next regrettable move occurred as the 1980s began.
In 1981, Montgomery was in the midst of orchestrating a mammoth deal: two acquisitions that would transform Cooper Labs into a billion-dollar conglomerate essentially overnight. It was, as Montgomery conceded in the November 7, 1983 issue of Forbes, “a terrible tactical error.” To complete the first half of the deal, Montgomery borrowed heavily, enabling him to purchase Sterndent, a Connecticut-based dental supply company with $250 million in annual sales. Montgomery failed to execute the second half of his masterstroke, the acquisition of a dental distribution company with more than $200 million in annual sales, but the damage had already been done by the Sterndent acquisition. With Cooper Labs’ debt towering at $159 million, the prime rate shot up to 21 percent, delivering a crippling blow to the debt-ridden Montgomery. Again, Cooper Labs teetered on the brink of collapse, its interest expense rising to $25 million, or 65 percent of the company’s 1982 operating profit. As he had done several years earlier, Montgomery was able to stave off disaster through asset sales. He sold most of Sterndent to Johnson & Johnson, making no profit on the deal. In another attempt to reduce the company’s debt, Montgomery sold other parts of Cooper Labs, but he did so in a way that became the talk of Wall Street.
The Roller Coaster 1980s
As part of a strategy that Montgomery called “Project Supernova,” parts of two subsidiaries were sold to the public in 1983. In January, he sold 18 percent of CooperVision, a subsidiary with $195 million in annual sales that owned an assortment of contact lens and ophthalmic supply companies. The stake in CooperVision, which figured as the core of Cooper Cos. during the 1990s, was sold at $20 per share, or approximately 27 times the subsidiary’s 1982 earnings. In August, Montgomery sold 17 percent of CooperBiomedical, a subsidiary that generated $50 million in sales that developed and sold drugs and research laboratory products. Investors paid 35 times CooperBiomedical’s 1983 earnings in the offering. Montgomery’s spin-offs were part of a trend in which parent companies sold typically less than a third of their subsidiaries to the public, a strategy that generated cash—Montgomery raised $60 million from the partial sale of CooperVision—and piqued investors’ interest in the assets of the parent company. “I don’t think management can just sit passively and see the price of their stock as being totally outside their control,” Montgomery explained to Fortune magazine in an August 8, 1983 interview.
Aided by Project Supernova, Cooper Labs recorded a remarkable turnaround from the Sterndent debacle. The company’s stock value more than doubled in 1983, profits rose, and annual revenues neared $400 million. At the heart of the recovery was CooperVision, which displayed a vitality that attracted investors and encouraged Montgomery to treat it as his primary vehicle for expansion. In 1983, he set a five-year goal of lifting CooperVision’s annual revenue volume to $1 billion, proposing to increase the subsidiary’s size fivefold. Toward this end, Montgomery made an important acquisition several months after selling the 18 percent stake in CooperVision to the public. The subsidiary purchased UCO Optics, a company that had played a pioneering role in the development of contact lenses and whose history was linked to the year Montgomery founded Cooper Labs.
In 1958, the year Cooper Labs began operating, Dr. Stanley Gordon founded the Contact Lens Guild in Rochester, New York. Gordon, who renamed the company Gordon Contact Lenses, Inc. in 1965, was renowned for his expertise in rigid lens design, but his most celebrated work involved the development of soft contact lenses. In 1970, Union Corporation purchased Gordon’s company, creating a new company named UCO Optics. The same year the UCO Optics corporate banner was first unfurled, Gordon developed tetrafilcon, which could be used to make a soft, hydrophilic contact lens to replace the hard, hydrophobic contact lenses that many wearers found uncomfortable. After an extensive development phase, UCO Optics used its proprietary tetrafilcon to unveil its Aquaflex brand in 1976, the third soft contact lens to be approved by the Food and Drug Administration (FDA).
The acquisition of UCO Optics by CooperVision added market strength to Montgomery’s position in the contact lens industry. Four years before the union was completed in 1983, CooperVision had released Permalens, the first contact lens approved by the FDA for 30-day continuous wear, which, combined with UCO Optics product line, created an enviable foundation on which to build.
The list of CooperVision’s eye care assets increased significantly in the years following its stock offering. In 1985, the company expanded its product line to include the Permalens, Permaflex, and Aquaflex brands. The following year, Cooper Companies was adopted as the parent company’s corporate title, with CooperVision, housing all the organization’s eye care assets, operating as a subsidiary of Cooper Companies.
Montgomery fell short of his five-year sales goal, but by 1988 he had more than tripled the size of CooperVision, increasing its annual revenue to more than $625 million. His work, however, was deemed unsatisfactory by a group of shareholders. Ironically, for someone who had attracted national press by displaying a penchant for asset sales, Montgomery’s fall stemmed from his unwillingness to sell assets, a perception held by two sets of brothers, the Singers and the Sturmans. There were three brothers from each family, all of whom had attended the same high school in Westchester County, New York. Collectively, the Singers and the Sturmans controlled 14 percent of Cooper Companies, giving them enough influence to force Montgomery to resign when the brothers threatened to launch a proxy fight. Montgomery stepped down in August 1988, leaving a company he had started 30 years earlier.
Cooper is a medical device company operating in two attractive specialty markets: contact lenses in the vision care market through CooperVision, and diagnostics and devices used in the physician’s office in the women’s healthcare market through CooperSurgical. In both these markets, we offer proprietary, patented, and, where possible, differentiated products. At CooperVision, we develop new products and improve manufacturing processes through research and engineering. Our business development activities focus on geographic expansion and, occasionally, product acquisition. At CooperSurgical, we develop new products internally, license innovative technology and attempt to consolidate the highly fragmented women’s healthcare market through product and company acquisitions.
With the close of the Montgomery era, a new chapter in the company’s history began, arguably the bleakest period in Cooper Companies’ existence. Disputes in the boardroom raged in the wake of Montgomery’s ouster, as the company’s performance—praised several years earlier by numerous analysts—sputtered amid the rancor. The turmoil boiled over after a federal insider trading investigation led to indictments against members of the Singer and Sturman families, which led to their removal from the company’s boardroom. Saddled with debt and lacking senior management to guide it, the company suffered profoundly. In 1991, the company’s stock value plunged to $1 per share, which, together with a $6 million loss for the year, served as the telltale signs of a company in crisis. The company needed a savior to cure its profound problems. In 1991, such an individual joined the ranks of Cooper Companies’senior management, sparking a revival that gathered momentum throughout the 1990s.
New Management, Stability, Growth for the 1990s
Thomas Bender joined Cooper Companies in 1991 as its new chief operating officer. He and fellow executives were forced to take drastic measures to breathe new life into the ailing concern. They shed assets that were underperforming, laid off hundreds of employees, and reduced debt. “It was a tough job,” recalled Bender in a January 18, 2000 interview with Knight-Ridder/Tribune Business News, addomg “We told employees that what we were doing was something for them long-term—and if we didn’t, there wouldn’t be anything for anyone.”
Cooper Companies emerged from the massive restructuring program as a dramatically smaller company focused on three business segments. What had once been a company with more than $600 million in annual revenue ended 1993 with $92.6 million in revenue, a total collected from its involvement in the mental healthcare market, the vision care market, and the women’s healthcare market. Cooper Companies operated in these three business areas through three subsidiaries: Hospital Group of America (HGA), CooperSurgical, and CooperVision. Of the three subsidiaries, two figured in the company’s long-term plans. HGA, which owned and operated psychiatric hospitals that provided inpatient and outpatient treatment, was declared a discontinued operation in October 1998. The decision to divest HGA stripped Cooper Companies of roughly $50 million in annual revenue, but Bender, named chief executive officer in 1994, wanted to sharpen the company’s focus exclusively on medical devices. Consequently, as the 1990s progressed, CooperSurgical and CooperVision received the bulk of the company’s attention and its resources.
CooperSurgical was formed in 1990, the year it acquired Frigitronics, a technology company that produced an assortment of gynecological and ophthalmic products. The acquisition provided CooperSurgical with entry into the women’s healthcare market, a foundation that was strengthened in 1991 with the purchase of Euro-Med, a direct-mail-order business that marketed gynecological instruments. In 1992, CooperSurgical continued to bolster its involvement in women’s healthcare by introducing a line of electrical instruments and disposable products to perform LEEP (Loop Electro-surgical Excision Procedure). LEEP, a surgical procedure, enabled physicians simultaneously to diagnose and treat diseases of the cervix. CooperSurgical’s stature increased in 1996, when the subsidiary purchased Unimar, a company that generated $6 million in sales of its disposable diagnostic products. Another $6 million-in-sales company was acquired in 1997, when CooperSurgical purchased Marlow. The transaction made CooperSurgical the exclusive distributor of an embryonic transfer catheter that was marketed to fertility clinics in the United States. In 1998, CooperSurgical made further advances when it introduced “Cerveillance,” a device the company developed that enabled physicians to document, store, and retrieve digital images of cervix examinations. In its final deal of the 1990s, CooperSurgical acquired the women’s healthcare assets of BEI Medical Systems, Inc.
As CooperSurgical increased its presence in the women’s healthcare market, CooperVision increased its stature through a series of acquisitions. In 1993, the subsidiary purchased CoastVision, Inc., a manufacturer of toric lenses. Toric lenses are required to correct astigmatism, an irregularity in the shape of the cornea of the eye that causes distorted vision. By acquiring CoastVision, CooperVision entered the toric lens market, which would become the strongest facet of the company’s contact lens business. In 1996, CooperVision doubled its contact lens manufacturing capacity, increasing the size of its Scottsville, New York, facility to 38,000 square feet. The following year, a series of important deals were concluded, beginning in February when the company acquired the Natural Touch line of cosmetic lenses from Wesley Jessen Vision Care. In December 1997, the company completed two important international deals. CooperVision acquired a British contact lens manufacturer, Aspect Vision Care, Ltd., and signed a marketing agreement with Rohto Pharmaceuticals, Ltd. to enter the Japanese contact lenses market, the second-largest market in the world. In March 1999, CooperVision received regulatory clearance to market lenses in Japan.
By the end of the 1990s, the expansion conducted through CooperVision and CooperSurgical increased Cooper Companies’ revenue volume to $165 million. Between 1993 and 1999, CooperSurgical’s sales grew from $14.6 million to $29.3 million, while during the same period CooperVision’s sales swelled from $32.6 million to $136 million. Cooper Companies drew much of its strength from its mainstay CooperVision subsidiary, which ranked as the leading manufacturer of toric contact lenses in the United States. The company hoped to become the largest manufacturer of toric lenses in the world by 2000.
CooperVision, Inc.; CooperSurgical, Inc.
- Parker Montgomery founds Cooper Laboratories.
- CooperVision introduces Permalens, the first contact lens approved for 30-day continuous wear.
- UCO Optics is acquired.
- Cooper Laboratories is renamed The Cooper Companies, Inc.
- Thomas Bender is hired as chief operating officer.
- Company announces the divestiture of Hospital Group of America.
Johnson & Johnson; Bausch & Lomb Inc.; Wesley Jessen VisionCare, Inc.
Cieply, Michael, “Coopernova,” Forbes, November 7, 1983, p. 231.
“Cooper Signs Definitive Agreement with Focus Healthcare to Divest Meadow wood Hospital; Hospital Group of America Will Close Its Headquarters,” Business Wire, January 10, 1999, p. 1.
Crabtree, Penni, “Irvine, Calif.-Based Contact Lens Maker Eyes Its Options,” Knight-Ridder/Tribune Business News, January 18, 2000.
Hicks, L. Wayne, “Marquest Takeover Bid Isn’t Dead Yet,” Denver Business Journal, July 19, 1991, p. 6.
Ketzenberger, John, “Cutting Its Loss: Copper Cos. Sells Anacomp Notes,” Indianapolis Business Journal, July 2, 1990, p. 5.
Pare, Terence P., “All in the Families,” Fortune, August 15, 1988, p. 83.
—Jeffrey L. Covell