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Bausch & Lomb to merge with private equity firm


After more than 150 years in business (69 of them as a public company), Bausch & Lomb has accepted an offer to merge with Warburg Pincus, a private equity firm.

Under terms of the $4.5 billion acquisition, announced May 16, affiliates of Warburg Pincus will acquire all of the outstanding shares of Bausch & Lomb common stock for $65 per share. The cash deal represents a premium of about 26% over the volume-weighted average share price for the 30 days before press reports of rumors regarding a potential acquisition of the company.

"As a private company, Bausch & Lomb will have greater flexibility to focus on our long-term strategic direction to be a global leader in providing innovative and technologically advanced eye-health products to eye-care professionals and consumers," said Ronald L. Zarrella, chairman and chief executive officer of Bausch & Lomb, in a prepared statement. "Warburg Pincus understands our industry and our business well, and [it] will be a tremendous asset as we build upon our leadership position and continue to implement our strategic plan to deliver enhanced value for our customers worldwide."

To that end, Advanced Medical Optics (AMO) issued the following statement May 24 in response to media reports regarding its interest in entering Bausch & Lomb's "go-shop" process:

"We believe it is only logical to explore this opportunity given the highly complementary nature of our two businesses. 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. 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. Of course, we will only proceed with a transaction if after conducting thorough due diligence, our board of directors determines it is in the best interest of AMO stockholders."

Prior to the announcement by AMO, analysts were speculating that a third-party solicitation would be unlikely.

"I don't think, from a strategic standpoint, there's an entity that wants to go head-to-head with a private equity reserve," said Christopher C. Cooley, managing director and senior analyst with FTN Midwest Securities Corp. in Cleveland.

Although rumors had surfaced about Pfizer showing interest, Cooley said that arrangement would not make sense given Pfizer's 2004 divestiture of the surgical ophthalmology unit it acquired with Pharmacia, he added.

Jeff D. Johnson, OD, senior medical technology analyst with Milwaukee-based R.W. Baird, said that public companies might not want to take on Bausch & Lomb's challenges at this time, but speculated that another private concern might take a look.

Fusarium frustration

Bausch & Lomb, which employs 1,500 at its headquarters, once commanded 43% of the branded multipurpose, contact lens-solution market, according to the company.

In spring 2006, the company began acknowledging reports of a rise in the number of Fusarium keratitis cases associated with users of its ReNu with MoistureLoc contact lens solution.

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