AMO drops its bid for Bausch & Lomb

Our Corporate Bureau
03 August 2007

Eye products maker Advanced Medical Optics (AMO) has withdrawn its $75 per share bid for its rival Bausch & Lomb (B&L) after weeks of opposition from AMO's largest shareholder, compounded by a lukewarm reception from B&L itself. ValueAct Capital, which holds 14.7 per cent of AMO stock, opposed the B&L buyout proposal after it was announced in early July.

While some analysts say this clears the way for Warburg Pincus' $65 per share leveraged buyout bid for B&L, others think it is a mere tactical retreat, so that B&L shareholders will decisively vote out the Warburg bid. B&L closed down 2 per cent at $62.54 after the announcement, while AMO ended the day up 1 per cent at $30.55.

B&L had given AMO chief executive James V Mazzo and his team until 3rd August 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 the request was extraordinary and that the deadline was unrealistic.

In the meanwhile, merger talks had already been stalled in a dispute about what AMO could tell its shareholders about B&L. AMO complained that it was unable to drum up shareholder support, being bound by a nondisclosure agreement with B&L that prevented it from properly outlining the benefits of the merger. But B&L refused to give AMO more time to persuade its shareholders and declined to enter into any further merger negotiations.

One of the problems AMO faces in getting a majority of its shareholders to approve the transaction is that it would need new share issue to finance the deal, as well as to boost its leverage substantially. And AMO hasn't yet secured committed finance for the buyout, which could be difficult given the turbulent debt markets.