|
Advanced Medical mulls Bausch & Lomb bid
2007-05-24
Advanced Medical Optics Inc. (NYSE:EYE) said on Thursday it was interested in acquiring Bausch & Lomb Inc. (NYSE:BOL) and was willing to pay more than the $3.67 billion proposal the eye-care company accepted from a private equity firm. Bausch & Lomb agreed last week to be acquired by Warburg Pincus for about $3.67 billion. Bausch & Lomb, however, had the right to solicit other offers during the next 50 days. "We believe that the current transaction with Warburg Pincus undervalues Bausch & Lomb, and we plan to enter the go-shop process with the intention of exploring a superior offer for the company," Advanced Medical said in a statement. Advanced Medical makes laser-vision correction tools, contact-lens cleaning solutions and other products. It aims to acquire Bausch & Lomb to fill in gaps in its product line -- such as contact lenses and eye glasses -- and gain greater international exposure in areas such as Latin America and Asia. Bausch & Lomb declined to comment. Shares of Bausch & Lomb have traded above Warburg Pincus's offer of $65 per share since the deal was announced as investors expected a higher offer to emerge. The Warburg Pincus bid had only offered a 5.7 percent premium to the closing price of Bausch & Lomb shares on May 15, the day before the deal was announced. Leading up to that deal, however, the stock had risen about 25 percent since mid-March on rumors the company would be acquired. The success of a rival offer may depend not just on the price tag, but the currency being used since the Warburg Pincus offer is all cash, analysts said. "It's a surprise (that) someone comes along and offers a higher cash bid. It's going to be hard for the (Bausch & Lomb) board not to recommend it," said Jeff Johnson, an analyst with Robert W. Baird. "If it's a combination of stock and cash, then maybe you have to think about it a little differently," Johnson said. Advanced Medical is considering a cash-and-stock offer or it could add a private equity partner to help it launch an all-cash offer, a source familiar with the situation said on Thursday. Several private equity firms have approached Advanced Medical about launching a joint bid for Bausch & Lomb, said the source, who declined to name the buyout shops. A rival company such as Advanced Medical could cut overlapping costs and jobs if it merged with Bausch & Lomb. Those cost-cuts, as well as advantages gained from combining product lines and sales forces could help a corporate bidder justify a higher offer, analysts said. A private equity firm would lack those advantages, analysts said. "From a cost standpoint, there's no question that another company can save more money in back office and things like that than a financial buyer," Johnson said. "But it still seems like there would be some antitrust issues." Advanced Medical said it would only proceed with a bid after reviewing Bausch & Lomb's proprietary financial records, and there was no assurance a deal would be reached. "We believe it is only logical to explore this opportunity given the highly complementary nature of our two businesses," Advanced Medical said. "Consideration of this potential transaction is consistent with our existing strategy to provide a full range of products that address vision care needs of people of all ages." Advanced Medical has not yet signed a confidentiality agreement to review Bausch & Lomb's financial records, but it aims to sign an agreement in the next two days, the source said. The possible bidding war for Bausch & Lomb comes just a year after the company conducted a worldwide recall of its popular contact lens solution. It was still recalling some product this year and has been struggling to overcome accounting troubles and product liability. Advanced Medical still must review those legal issues before it decides to proceed with an offer, the source said. If Bausch & Lomb accepts a superior bid, it must pay a $40 million break-up fee to Warburg Pincus. Shares of Bausch & Lomb were up $3.27, or 4.9 percent, at $69.72 in afternoon trading on the New York Stock Exchange. Advanced Medical's stock shed $1.27, or 3 percent, to $41.17. A flurry of options activity was also seen in Bausch & Lomb. The June calls, granting the right to buy Bausch shares at $70, already exceeded their contracts outstanding for that series during the first hour of trading, indicating that new positions were initiated. Those call contracts traded 938 times and cost $1, up 85 cents on the day. "This indicates that investors are anticipating higher bids for Bausch & Lomb," said William Lefkowitz, options strategist at brokerage firm vFinance Investments in New York. (Additional reporting by Debra Sherman and Doris Frankel in Chicago)
| 
