Medicis Pharmaceutical Corp. (MRX), a maker of drugs to treat skin conditions, on Monday said it agreed to acquire breast implant maker Inamed Corp. (IMDC) for $2.8 billion in cash and stock.

The deal seeks to take advantage of the fast-growing vanity market, fueled by demand from aging baby boomers and other image-conscious consumers.

"It makes great strategic sense for the two of them ... You've got an emerging new area in the form of aesthetics, which has some features that are attractive to both companies and investors," said Thomas Gunderson, an analyst at Piper Jaffray.

Inamed makes obesity products including its so-called lap band for the extremely overweight, and it is currently trying to convince regulators to allow silicone-based breast implants back on the market. Medicis makes skin care products.

Inamed shares rose about 4 percent on the Nasdaq on the news, while Medicis shares sank about 6 percent on the New York Stock Exchange (search).

Under the terms of the deal, Inamed stockholders will receive 1.4205 shares of Medicis common stock and $30 in cash for each share of Inamed common stock. Based on Medicis' closing price on Friday, the deal is worth $75 per Inamed share, or about $2.8 billion overall, the companies said.

The deal represents a 13 percent premium over Inamed's Friday close of $66.24 on the Nasdaq.

Both companies cater to plastic surgeons, cosmetic surgeons and dermatologists.

Medicis said the deal would reduce 2005 profit and add slightly to earnings in 2006. Both forecasts do not include new products.

In January, Medicis said it expects fiscal 2005 earnings of $1.43 per share excluding special charges.

Analysts on average expect Medicis to earn $1.44 in fiscal 2005 and $1.64 in fiscal 2006, according to Reuters Estimates.

The combined company will have annual revenue of more than $700 million, operations in more than 12 countries, businesses in over 60 countries, and about 1,500 employees.

"With the large number of aging baby boomers and the focus by all age groups on maintaining a healthy and youthful appearance and self-image, we will be poised to continue delivering value and revenue growth," said Jonah Shacknai, chief executive of Medicis, in a statement.

The companies expect the transaction to close by the end of 2005. Deutsche Bank Securities is financial advisor to Medicis; JPMorgan is financial advisor to Inamed.

Santa Barbara, Calif.-based Inamed last week disclosed that the Securities and Exchange Commission (search) has begun a formal private investigation related to one style of its silicone gel-filled breast implants.

The Food and Drug Administration (search) will next month consider for the second time Inamed's bid to reverse a 12-year-old ban on silicone breast implants.

One analyst questioned whether the deal would be as valuable if the FDA rejects the bid.

Shares of Medicis fell $1.98, or 6.3 percent, to $29.70 on the New York Stock Exchange, while Inamed rose $2.79, or 4.2 percent, to $69.03.