Advanced Medical Optics confirmed a report by CNBC’s David Faber that it plans to bid for Bausch & Lomb .
Last week, Bausch & Lomb agreed to a $3.7 billion buyout by Warburg Pincus.
Faber said Advanced Medical Optics is likely to make a cash-and-stock bid exceeding $70 a share, topping last week’s $65-a-share offer. However, Advanced Medical Optics could partner with a private equity firm and make an all-cash offer if stockholders reject a cash-and-stock deal.
Morgan Stanley, advisor to Bausch & Lomb, solicited the second bid, as it's required to do under the "go shop" provision of the merger agreement. Warburg Pincus has the right to match any offer.
Morgan Stanley has questioned the ability of strategic bidders for Bausch & Lomb to secure needed anti-trust approvals. But Faber noted that Advanced Medical Optics is smaller than Bausch & Lomb, and while their contact lens solution businesses would overlap, their combined market share may not be big enough to warrant any divestitures.
In the last 18 months, Bausch & Lomb has been hit with product recalls, accounting problems and delayed financial reports. It recently revealed that 2006 revenue dropped 3% to $2.9 billion after a 21% skid in lens-care sales.
Bausch & Lomb developed sunglasses for the military in World War I and camera lenses used to capture the first satellite images of the moon. The company introduced the first contact lenses in 1971.