ValueAct against Advanced Medical Optics' bid for Bausch & Lomb

By Lisa Kerner

Charlotte, N.C., July 11 - Advanced Medical Optics, Inc. shareholders led by ValueAct Capital objected to the company's proposed acquisition of Bausch & Lomb Inc. in the belief the move is "fundamentally ill advised" and would reduce shareholder returns.

ValueAct, which owns 8.8 million shares, or 14.7%, of Advanced Medical Optics' outstanding shares, intends to vote against the deal, according to a letter included as part of a schedule 13D filing with the Securities and Exchange Commission.

"The proposed acquisition increases business risk by further concentrating Advanced Medical Optics' cash flows in a consumer contact lens and lens care business that is clearly prone to product recalls and that has a long-term demand profile that is much more questionable than that of American Medical Optics' surgical business," the investors wrote.

The proposed transaction also "raises substantial regulatory risk" that has stalled financing commitments from private equity partners, according to ValueAct Capital.

ValueAct also questioned company president and chief executive officer James V. Mazzo's ability to integrate both IntraLase and Bausch & Lomb, especially in light of the Complete MoisturePlus recall.

In response, Advanced Medical Optics said ValueAct's opposition is hard to understand given its prior interest "in investing $700 million in equity" in a Bausch & Lomb acquisition and "desire to participate in financing the transaction as recently as July 5."

As previously reported, Advanced Medical Optics submitted a proposal to acquire Bausch & Lomb for $75 per share in cash and stock in a transaction valued at $4.3 billion. Each Bausch & Lomb share would be exchanged for $45 in cash and a fixed number of shares with a value of $30.

The deal is subject to the termination of Bausch & Lomb's $65-per-share cash merger agreement with affiliates of Warburg Pincus LLC.

Advanced Medical Optics is a Santa Ana, Calif.-based provider of ophthalmic surgical devices and eye care products.

Based in Rochester, N.Y., Bausch & Lomb is an eye health company.

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