ROCHESTER, N.Y. – Advanced Medical Optics Inc. (EYE) on Thursday offered to buy eye-care products rival Bausch & Lomb Inc. (BOL) for $4.23 billion in cash and stock, topping a $3.67 billion cash bid by a private equity firm.
The Santa Ana, Calif.-based company put in a $75-a-share offer of $45 in cash and $30 in AMO stock for each Bausch & Lomb share.
Bausch & Lomb said its board determined that the offer "is bona fide and is reasonably likely to result in a superior proposal." It said it planned "to engage in further discussions" but cautioned that "there can be no assurances as to whether the AMO proposal will ultimately result in a transaction."
Warburg Pincus, a buyout and venture capital firm in New York, won an agreement from Bausch & Lomb's board in mid-May to pay $65 a share for the 154-year-old maker of contact lenses, ophthalmic drugs and vision-correction surgical instruments.
The new offer came on the final day of a 50-day period that Bausch & Lomb set aside for other buyers to make a better bid. Under the deal with Warburg Pincus, Bausch & Lomb can solicit superior proposals until midnight Thursday but would have to pay a $40 million breakup fee if it accepts any other offer.
"I thought $65 was a fair offer and so $75 obviously trumps that," said analyst Jeff Johnson of Robert W. Baird & Co. in Milwaukee. "The go-shop provision is not over until 11:59 p.m. Theoretically, there could be other offers as well, and also Warburg, I'm sure, would have a chance to come back to the table if they'd want to."
Bausch & Lomb shares rose $3.36, or 4.9 percent, to $72 Thursday. Advanced Medical Optics shares rose 42 cents, or 1.2 percent, to $35.89.
AMO Chairman and Chief Executive Jim Mazzo said the bid is strategically and financially superior to Bausch & Lomb's existing agreement with Warburg Pincus.
"The AMO and B&L businesses complement each other and together would provide increased scale, scope and the enhanced ability to generate productivity and efficiency improvements," Mazzo said in a statement.
Advanced Medical Optics first disclosed its interest in acquiring Bausch & Lomb on May 24. The next day, it voluntarily recalled its leading contact lens care product after a federal investigation linked it to a rare eye infection.
The Centers for Disease Control and Prevention said the multipurpose solution, Complete MoisturePlus, seems 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 global recall fueled a sharp sell-off in Advanced Medical Optics' stock, prompting uncertainty as to whether it would actually made a bid for its bigger rival.
Last week, citing the recall, the company cut its 2007 outlook last week 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, down from $1.15 billion to $1.18 billion.
Bausch & Lomb has been struggling to recover from the May 2006 recall of a contact lens cleaner blamed for an outbreak of severe eye 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 potentially blinding Fusarium keratitis infections in the United States, Asia and other parts of the world.
Bausch & Lomb posted $2.3 billion in sales last year and employs about 13,000 employees, while Advanced Medical Optics recorded $998 million in sales in 2006 and had 3,300 employees.
Advanced Medical Optics bought Visx Inc., a maker of laser eye surgery devices, in a deal last year valued at about $1.25 billion in cash and stock. In April, it acquired IntraLase Corp. of Irvine, Calif., a vision-correction laser maker. In the lens solution market, it is a No. 3 player behind Alcon Inc. and Bausch & Lomb.