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AMO alters proposal to tempt Bausch & Lomb

Advanced Medical Optics Inc (AMO) tried on Friday to improve its chances of buying Bausch & Lomb Inc by offering two proposals to prove that its own shareholders support the deal.

Bausch & Lomb had already accepted a US$3.67 billion cash bid by private equity firm Warburg Pincus when AMO made its US$4.2 billion cash-and-stock bid for the maker of contact lenses, ophthalmic drugs and vision-correction surgical instruments.

Bausch & Lomb told the Santa Ana, California-based company this week that to consider the new offer as a "superior proposal," it would need "concrete, credible evidence that holders of a significant percentage of AMO shares" would support it.

Meeting a midday Friday deadline, AMO responded with an offer that did not change the US$75 per share cash-and-stock offer, but outlined two alternatives to satisfy the support concerns. The company said it still believed its deal is better than the Warburg Pincus offer.

The first scenario would have Bausch & Lomb relax a confidentiality agreement to allow AMO to discuss certain details of the proposal, including cost savings expected from reduced overhead, with the shareholders.

The other alternative would require Bausch & Lomb to modify its agreement with Warburg Pincus. That plan would have Bausch & Lomb postpone its shareholder vote on the Warburg deal to allow time for an AMO shareholder vote.

Bausch & Lomb declined to comment on the AMO response.

"I think Bausch is going to say `no dice,'" Piper Jaffray analyst Mark Mullikin said.

Neither Bausch & Lomb nor Warburg Pincus would have any incentive to change their agreement, as outlined in the second scenario.

"Certainly, Warburg Pincus won't want to because they want to win the bid," Mullikin said.

"On the [first alternative], where Bausch & Lomb would have to approve a modification so AMO could go market the deal to their investors, they're not going to go for that," Mullikin said. "They're not going to want to disclose that information to public investors like Fidelity and MSS [Capital].''

AMO spokesman Andrew Cole said the company had no comment on its latest offer.

Under the new offer, AMO would pay Bausch & Lomb US$50 million if AMO shareholders vote down a deal, up from US$35 million in the previous offer.

AMO's US$75-a-share offer includes US$45 in cash and US$30 in AMO stock for each Bausch & Lomb share. The offer came on July 5, on the final day of a 50-day period set aside for other buyers to make a better bid. Bausch & Lomb would have to pay Warburg Pincus a US$40 million breakup fee if it accepts another offer.

Bausch & Lomb posted US$2.3 billion in sales last year and employs 13,000 employees, while AMO recorded US$998 million in sales and had 3,300 employees.
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