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Sat, Jul 07, 2007 - Page 10 News List

Advanced Medical offers competing bid for Bausch


Bausch & Lomb Inc, the eye care giant that announced plans early in May to sell itself to a private equity firm for US$65 a share, has received a competing offer of US$75 in cash and stock from Advanced Medical Optics Inc, Bausch announced on Thursday.

Because the new bid, valued at more than US$4 billion, contains a potentially volatile stock component of US$30 a share, it is not directly comparable with the original US$3.67 billion all-cash buyout offered by Warburg Pincus, the private equity firm.

In addition, a partial overlap in eye care products between Bausch, based in Rochester, New York, and Advanced Medical, based in Santa Ana, California, could raise antitrust questions and add uncertainty to how rapidly a deal could be completed.

As a result, analysts said, Warburg could still emerge as Bausch & Lomb's preferred suitor, with a sweetened offer in the US$70 to US$72 range. Bausch's shares, which closed on Tuesday before the Fourth of July holiday at US$68.64, fell as low as $67.66 early in the session on Thursday but later rose to US$72 before trading was halted when the Wall Street Journal reported the new offer online.

Advanced Medical's shares, by contrast, fell slightly after the news but before trading in its stock was halted. They ended higher for the day, at US$35.89, up from US$35.47 on Tuesday.

Advanced Medical's offer came on the last day in the 50-day period left by Bausch's agreement with Warburg allowing Bausch to solicit higher bids.

Although Advanced Medical had said in May that it was interested in acquiring Bausch, the offer came as a surprise to some analysts because Advanced Medical had subsequently been forced to undertake an expensive recall of Complete MoisturePlus, its leading contact lens solution, after an unusual number of users came down with eye infections.

Health regulators and the company are investigating the outbreak and Complete MoisturePlus' apparent links to it.

Last week, Advanced Medical told analysts it forecast a loss as high as US$1.15 a share on sales of US$1.05 billion to US$1.07 billion this year because of the recall, compared with its previous forecast of earnings up to US$1.55 a share on sales as high as US$1.18 billion.

Acquiring Bausch would help Advanced enter the market for contact lenses and give it a much stronger position in a better-known lens care solutions brand to go with its surgical implants and laser equipment.

However, Bausch's name in lens care has been tarnished by its own recall last year of ReNu With MoistureLoc, which was linked to an outbreak of fungal infections.

The provision that allowed Bausch to solicit Advanced Medical's bid is known as a go-shop provision. Go-shop provisions, aimed at ensuring that companies receive the highest possible price in a sale, have become increasingly popular but have rarely led to higher offers.

In Bausch's case, Advanced Medical may have been encouraged by the relatively low breakup fee in the Warburg deal. If Bausch ends up with another buyer, it must pay Warburg US$40 million, or about 1 percent of the transaction price. Such fees can run to 3 percent or higher.

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