Browning West Delivers Letter to The Cooper Companies Board of Directors

Core Viewpoint - Browning West, an investment management firm, criticizes Cooper's lack of strategic focus, misaligned incentives, and inadequate board oversight, which have led to significant underperformance compared to market indices. The firm advocates for a restructuring of Cooper as a pure-play vision care company, suggesting that this could potentially double the stock price [1][2]. Group 1: Lack of Strategic Focus - Cooper operates two leading businesses: CooperVision, the largest contact lens company, and CooperSurgical, the largest fertility medical devices business, both of which have strong growth potential due to increasing myopia and infertility rates globally [2]. - Despite solid market positions, Cooper has underperformed the S&P 500 and related healthcare indices over the past 1, 3, and 5 years, with total revenue increasing by 47% but non-GAAP EPS growing only 20% from 2019 to 2024 [2][22]. - The current corporate structure dilutes management focus, leading to poor execution and failure to meet financial guidance, as evidenced by a significant drop in organic growth rates and a 13% share price decline following disappointing earnings [5][8]. Group 2: Misaligned Incentive Structure - Cooper's incentive structure promotes a "growth at all costs" mentality without considering free cash flow (FCF) or return on invested capital (ROIC), resulting in a cumulative ROIC of below 5% on approximately $4 billion invested in CooperSurgical over the past decade [6][27]. - Management's inability to define maintenance versus growth capital expenditures has raised concerns among shareholders, especially as FCF remains below 2019 levels despite a 54% revenue increase [7][28]. - Shareholders have experienced a 35% decline in Cooper's share price since September 2024, while management has continued to receive substantial compensation [7][28]. Group 3: Inadequate Board Oversight - The Board has rewarded management despite value-destructive acquisitions and capital misallocation, leading to a 100 percentage point underperformance compared to the S&P 500 over the past five years [8][15]. - The Board lacks essential expertise in vision care and medical devices, hindering effective oversight and strategic evaluation [8][10]. - The current Chairman, Robert Weiss, has been on the Board for nearly three decades and has sold over $100 million in stock since 2019, raising questions about his independence and the Board's ability to make sound strategic decisions [9][10]. Group 4: Recommendations for Change - Browning West urges the appointment of new directors with relevant sector expertise to enhance governance and align incentives with long-term shareholder value creation [11][12]. - A refreshed Board could drive initiatives to unlock Cooper's potential, potentially doubling EPS and improving the company's valuation multiple [12][14]. - The firm emphasizes the need for a thorough reassessment of operating plans and capital allocation strategies for both CooperVision and CooperSurgical [14].