In what may be shaping up to be still another auction battle in the med-tech sector, Advanced Medical Optics (AMO; Santa Ana, California), a developer of ophthalmic surgical devices and eye care products, yesterday issued a statement saying it is interested in buying Bausch & Lomb (B&L; Rochester, New York) — a somewhat beleaguered competitor in the ophthalmology sector — and may be willing to pay more than the $3.67 billion that Warburg Pincus offered for the company last week (Medical Device Daily, May 17, 2007).

"We believe it is only logical to explore this opportunity given the highly complementary nature of our two businesses," AMO said in a statement. "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."

The company also said that it believes the current transaction with Warburg Pincus "undervalues" B&L. Thus, AMO said it plans "to enter the go-shop process with the intention of exploring a superior offer for the company."

AMO did not state what its higher offer might be, saying it would only proceed with a bid after reviewing B&L's financials.

"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," the company said.

The potential bidding war for B&L comes just a year after the company conducted a worldwide recall of its popular contact lens solution last year.

B&L experienced multiple difficulties in 2006 when it issued a series of recalls of its ReNu with MoistureLoc contact lens cleaner, forced by the product's association with Fusarium keratitis infections that potentially could cause blindness (Medical Device Daily, April 12, 2006/April 13, 2006/April 17, 2006). As a result of its investigation, the FDA said that the solution was perhaps the "root cause" of the infections.

Of the 180 infection victims confirmed, 59 needed cornea transplants to try to restore their vision, the Centers for Disease Control and Prevention (Atlanta), said. The recalls resulted in charges of $25 million and $19 million as the result of returns and rebates. The recalls resulted in fueling a large number of liability claims against the company.

More recently, the company recalled about 1.5 million bottles of ReNu MultiPlus solution in March because trace amounts of iron could cause the cleaner to lose effectiveness earlier than normal (MDD, March 7, 2007).

Other problems for the company included the requirement to restate financial results since 2000 because of errors in accounting that, in turn, resulted in delaying its financial filings (MDD, May 11, 2006).

While B&L had agreed last week to be acquired by Warburg Pincus, it still has the right to solicit other offers during the next 50 days according to the terms of its agreement. If the company terminates its agreement with Warburg Pincus, it will have to pay a $40 million breakup fee.

B&L's stock has traded above Warburg Pincus's offer of $65 per share since the deal was first disclosed.

The Warburg Pincus bid had only offered a 5.7% premium to the closing price of B&L shares on May 15, the day before the deal was reported. Leading up to that deal, however, the stock had risen about 25% since mid-March on rumors the company would be acquired.

The success of a rival offer may depend not just on the price tag, but the currency being used since the Warburg Pincus offer is all cash.

A rival company such as AMO could cut redundant and overlapping costs and jobs if it merged with B&L, an advantage that a private equity firm is less likely to have.

In other dealmaking news: Varian Medical Systems (Palo Alto, California) said it has completed the $21 million acquisition of privately-held Bio-Imaging Research (BIR; Lincolnshire, Illinois), a supplier of X-ray imaging products for security and inspection.

"This acquisition enables Varian to offer customers more complete X-ray imaging solutions for cargo screening, industrial inspection and non-destructive testing," said Tim Guertin, president/CEO of Varian. "With BIR's components and software for capturing, processing and analyzing X-ray images, we are offering a complete imaging solution for security and inspection as well as complete systems for non-destructive testing."

BIR, which has about 50 employees, will operate within Varian's Security and Inspection Products (SIP) unit and report to SIP General Manager Robert Drubka.

Varian said it expects that BIR will add revenues of about $5 million for the remainder of FY07 and that it will be nearly neutral to earnings per diluted share in FY)7. Results for BIR will be included with SIP results in Varian's "Other" business category.

Varian makes medical devices and software for treating cancer and other medical conditions with radiotherapy, radiosurgery, proton therapy and brachytherapy.

No Comments