Bid for Bausch & Lomb dropped
Eye-care products maker Advanced Medical Optics Inc. of Santa Ana withdrew its month-old bid for rival Bausch & Lomb Inc. on Wednesday, saying it faced unrealistic demands to show that its shareholders supported the deal.
In a sharply worded letter to Rochester, N.Y.-based Bausch & Lomb’s board of directors, Advanced Medical Optics Chief Executive James V. Mazzo said, “if, in the future, you decide to run a process that is designed to deliver value to your shareholders, please let us know.”
Mazzo was referring to conditions set by Bausch & Lomb directors that he said favored a less lucrative rival offer from private-equity firm Warburg Pincus.
Early this week, Bausch & Lomb had given Mazzo and his team until Friday to show “concrete, credible evidence” that enough Advanced Medical Optics shareholders would vote to approve the $75-a-share takeover bid announced last month. Mazzo said that request was extraordinary and the deadline was unrealistic.
Advanced Medical Optics’ cash-and-stock proposal topped an existing $65-a-share offer from Warburg Pincus.
The deal began to unravel almost immediately after Advanced Medical Optics announced it. ValueAct Capital, Advanced Medical Optics’ largest stockholder with 15% of the company’s outstanding shares, told both parties it intended to vote against the takeover a few days after the announcement.
It said it had reservations about several aspects of the merger, including possible regulatory hurdles as well as the distraction a major merger might present when the company was already in the midst of dealing with a serious product recall.
In May, Advanced Medical Optics recalled all of its bestselling Complete MoisturePlus contact lens solution because of a possible link to a serious eye infection. On Wednesday, the Food and Drug Administration said it was concerned that consumers unaware of the recall may still be using the solution.
MoisturePlus accounted for about one-tenth of Advanced Medical Optics’ $1 billion in sales last year. Some analysts have said the company, which also purchased IntraLase Corp. of Irvine and WaveFront Sciences Inc. of Albuquerque earlier this year, might do better to focus on its current operations rather than on gobbling up a company with twice its sales volume.
“We felt they were biting much more than they can chew,” said G. Mason Morfit, a partner at San Francisco-based ValueAct Capital. “AMO has great assets and we will all do well if they focus on running the company.”
Investors seemed to agree. Advanced Medical Optics shares rose 32 cents Wednesday, or 1.06%, to $30.55. Bausch & Lomb shares dropped $1.39, or 2.17%, to $62.54.
Advanced Medical Optics and Bausch & Lomb officials declined to comment.
In Mazzo’s letter, which was filed with the Securities and Exchange Commission, the chief executive accused the Bausch & Lomb board of playing favorites.
“You do not have any interest in providing your shareholders with the opportunity to receive the $75 per share,” Mazzo said. “Instead, you remain intent on delivering Bausch & Lomb to Warburg Pincus.”
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