A Medical Device Daily

Eye care products maker Advanced Medical Optics (Santa Ana, California) on Wednesday responded to its third largest shareholder, ValueAct Capital, which opposes the company's takeover bid for Bausch & Lomb (B&L; Rochester, New York).

Earlier this month AMO made an 11th hour $4.3 billion offer for B&L (Medical Device Daily, July 9, 2007), trumping Warburg Pincus' $3.67 billion offer, which values the shares at $65. Even though AMO had hinted that it might make an offer for B&L back in May (MDD, May 25, 2007), the bid still came as a bit of a surprise, given AMO's costly recall of its Complete MoisturePlus contact lens solution initiated less than five days after it dropped that hint (MDD, May 30, 2007).

AMO this month told analysts that it forecast a loss as high as $1.15 a share on sales of $1.05 billion to $1.07 billion this year because of the recall, a marked decrease from the previous forecast of earnings up to $1.55 a share on sales as high as $1.18 billion.

James Mazzo, AMO's CEO, responding to a critical letter from ValueAct, said he was "surprised and disappointed" by ValueAct's opposition to the $4.23 billion hostile bid for B&L.

Mazzo said this was "especially hard to understand given [ValueAct's] expressed interest on June 12 in investing $700 million in equity in a Bausch & Lomb acquisition and [their] reaffirmation of a desire to participate in financing the transaction as recently as July 5."

Mazzo reiterated his view that the deal offers "a unique and compelling value-creating opportunity."

The letter, filed with the Securities and Exchange Commission , comes one day after rival suitor Warburg Pincus cleared regulatory hurdles to move ahead with its offer of $65 a share in cash, or $3.67 billion, for B&L.

AMO's offer of $75 a share consists of $45 in cash and $30 in stock.

"[ValueAct's] letter makes numerous inaccurate and misleading statements about the proposed transaction that we feel compelled to address," Mazzo said.

Among them was what Mazzo called a "blatant mischaracterization" of AMO's conversations regarding potential commitments from private equity firms to finance the bid.

"While we may use private equity financing in the future, we do not have commitments at the current time only because we have not sought them — and not because of any perceived regulatory risk," Mazzo said, adding he has received positive feedback from many shareholders.

AMO's largest holders are Fidelity Management & Research and MFS Investments.

Mazzo also responded to ValueAct's concerns about regulatory risks, asserting he was confident the issues could be addressed in a timely matter.

AMO, a maker of laser-vision correction equipment, contact-lens cleaning solutions and other products, would likely face tougher regulatory scrutiny because some of its businesses overlap with Bausch & Lomb's, according to Wall Street analysts.

ValueAct had about 2 million shares, or about 12.2% of AMO.

Larry Biegelsen, an analyst with Wachovia, did not expect bidding for B&L to rise much higher.

"Bausch's financial advisor considered Warburg's $65 offer fair from a financial point of view, and considering Warburg's disciplined investment philosophy, we do not expect Warburg to increase its offer substantially," Biegelsen wrote in a research note.

In other dealmaking activity:

• Cantel Medical (Little Falls, New Jersey), through its Crosstex International (Hauppauge, New York) subsidiary, said it has expanded its dental infection prevention and control business by purchasing the assets of Twist 2 It (Woodside, New York), which makes a disposable prophy angle for the cleaning and polishing of teeth that eliminates the splatter of saliva, blood and other potential infectious matter. Terms were not disclosed.

The business being acquired has pre-acquisition annual revenues of about $1.3 million, Cantel Medical said.

Crosstex branded and private label products include patient towels and bibs, sterilization pouches and accessories, face masks, eyewear, disinfectants and deodorizers, germicidal wipes, hand care products, gloves, sponges, cotton products, needles and syringes, scalpels and blades, containers, saliva evacuators and ejectors.

• Emergency Medical Services (Greenwood Village, Colorado) said it has entered into a definitive agreement to acquire Abbott Ambulance (St. Louis, Missouri), the largest private provider of emergency and non-emergency ambulance services in the greater St. Louis area.

As part of the transaction, the company also will acquire certain affiliates of Abbott, including Mission Care of Illinois , a provider of emergency and non-emergency ambulance services in southwest Illinois; the IHM Health Studies Center , an accredited paramedic training school; and Access2Care , a managed transportation business.

Upon completion of the transaction, Abbott will become a wholly owned subsidiary of American Medical Response (AMR), Emergency Medical Services' transporation services segment, and will operate under the Abbott brand.

The agreement to buy Abbott Ambulance was entered into on July 3, the company said. The transaction is expected to close within 30 days, subject to customary conditions. The company estimates that the acquisition will contribute roughly $28 million in annual revenue and 87,000 transports.