Long Takeover Battle May Be Near Resolution

The nation’s longest-running hostile takeover marked its two-year anniversary Sunday amid signs the fight between medical device companies U.S. Surgical Corp. and Circon Corp. may be nearing an end.

The target, Santa Barbara-based Circon, has begun shopping itself to prospective buyers because of declining sales, intense competition and an upcoming shareholder meeting that could give hostile bidder U.S. Surgical control of its board, sources said.

In fighting the bid from U.S. Surgical, Circon has previously said it was not for sale.

Although it is unlikely that Circon would suddenly accept U.S. Surgical’s offer, the situation is being complicated by the now-uncertain status of U.S. Surgical, which in May agreed to be acquired in a friendly transaction with Tyco International for $3.3 billion. The acquisitive industrial conglomerate, which typically pursues only friendly transactions, has not disclosed if it wants to buy Circon.

The Circon takeover attempt began on Aug. 2, 1996, when U.S. Surgical launched an unsolicited, $230-million bid for Circon that valued the company at $18 a share. U.S. Surgical changed the bid several times to reflect Circon’s financial performance and it now stands at about $220 million, or $16.50 per share.

U.S. Surgical, based in Norwalk, Conn., is a leading maker of laparoscopic products used in minimally invasive surgery. An acquisition of Circon would expand its product lines to the growing areas of urology and gynecology, in which Circon sells both disposable and laparoscopic hardware, including small surgical video cameras.

U.S. Surgical has inched forward in its effort, winning two seats on Circon’s seven-member board of directors. Another two board seats are up for grabs at Circon’s next annual meeting, which a court recently ruled must be held before Nov. 24.

“I can’t imagine that Circon would prevail at the next meeting,” said one source, who requested anonymity. Last year, a majority of Circon shareholders voted in favor of a nonbinding resolution to auction the company.

U.S. Surgical, which recently extended its tender offer to Sept. 15, said it still views Circon as an attractive target.

“We’re still very much interested,” said spokeswoman Marianne Scipione.

As for Tyco, “eventually there will be a decision made, but I couldn’t tell you when that will be nor what the nature of that decision will be,” said Brad McGee, a senior vice president at Tyco.

The protracted effort by U.S. Surgical is unusual in today’s world of mergers and acquisitions, where the vast majority of deals are negotiated on a friendly basis and hostile approaches typically are resolved within a few months.