Rival Withdraws Bid for Bausch & Lomb Inc.

Advanced Medical Optics Inc. on Wednesday withdrew its $4.2 billion buyout bid for rival eye care products maker Bausch & Lomb Inc., clearing the way for Bausch & Lomb to be acquired by private equity firm Warburg Pincus for $3.67 billion. In a letter to Bausch & Lomb’s board members, Advanced Medical’s chief executive, James Mazzo, said he had concluded they “remain intent on delivering Bausch & Lomb to Warburg Pincus at $65 per share” in cash versus his Santa Ana, Calif.-based company’s cash-and-stock offer of $75 a share. Mazzo described the Warburg deal as inferior “both in terms of value and the ability for the Bausch & Lomb shareholders to participate in the significant synergies that combining AMO and Bausch & Lomb would create. “Accordingly, we have withdrawn our offer,” Mazzo said in a regulatory filing. “If, in the future, you decide to run a process that is designed to deliver value to your shareholders, please let us know.” Shares of Bausch & Lomb fell $1.39, or 2.2 percent, to $62.54 Wednesday. They have traded within a 52-week range of $43.97 and $77. Warburg Pincus, a buyout and venture capital firm in New York, agreed with Bausch & Lomb’s board in mid-May on an all-cash takeover of the 154-year-old, Rochester-based maker of contact lenses, ophthalmic drugs and vision-correction surgical instruments. Advanced Medical put in a $75-a-share offer of $45 in cash and $30 in AMO stock for each Bausch & Lomb share on July 5, the final day of a 50-day period set aside for other buyers to make a better bid. Its counter bid, it maintained, would bring a potential boost to earnings and an estimated $180 million in annual cost savings. But its third-largest shareholder, ValueAct Capital, which owns 8.8 million shares or a 14.7 percent stake, quickly opposed the takeover move. “I really thought ValueAct’s opposition is a big obstacle because they did have a pretty large stake and are a very vocal shareholder,” said analyst Mark Mullikin of Piper Jaffray in Minneapolis. “I think there’s just too much uncertainty in AMO’s bid,” Mullikin added, not least “the long-term value of the stock” after its global recall in May of a contact lens cleaner linked by federal investigators to a rare eye infection. Advanced Medical first disclosed its interest in acquiring its bigger rival on May 24. The next day, it voluntarily recalled its leading contact lens cleaner, Complete MoisturePlus. The Centers for Disease Control and Prevention said the multipurpose solution seemed to be a factor in cases of Acanthamoeba keratitis, a painful eye infection caused by a waterborne organism that, untreated, can lead to permanent vision loss or blindness. The recall fueled a sharp sell-off in Advanced Medical Optics’ stock and, in late June, the company cut its 2007 outlook to an adjusted loss of 95 cents to $1.15 a share from a previous range of $1.40 to $1.55. It also lowered projected sales to $1.05 billion to $1.07 billion from $1.15 billion to $1.18 billion. Coincidentally, Bausch & Lomb has been struggling to recover from the May 2006 recall of a contact lens cleaner blamed for an outbreak of potentially blinding fungal infections. Federal regulators called its ReNu with MoistureLoc multipurpose contact lens cleaner, a $100 million-a-year product, the “potential root cause” of a flurry of Fusarium keratitis infections in the United States, Asia and other parts of the world. On Monday, Bausch & Lomb Inc. said it was giving Advanced Medical limited permission to discuss its offer with key shareholders even while expressing “substantial uncertainty” that the California company could get shareholder approval. Bausch & Lomb gave Advanced Medical until Friday to provide “concrete, credible evidence” of its ability to win over shareholders. Advanced Medical countered by asking for several weeks to update its shareholders, but Bausch & Lomb was not forthcoming. “We are disappointed that the Bausch & Lomb board has concluded not to grant adequate time for us to seek to provide you with the information you requested in a manner that would be meaningful,” Mazzo said in his letter. Bausch & Lomb posted $2.3 billion in sales last year and employs about 13,000 employees, while Advanced Medical recorded $998 million in sales in 2006 and had 3,300 employees. Advanced Medical makes artificial lenses and other medical devices for the eye. In the lens solution market, it is a No. 3 player behind Alcon Inc. and Bausch & Lomb. SOURCE: Forbes