Contact lens and lens product maker Bausch & Lomb announced Thursday it has received an acquisition proposal from Advanced Medical Optics (AMO), a Santa Ana, Calif.-based maker of surgical devices and contact lens care products.

AMO said yesterday it has submitted a proposal to acquire the Rochester, N.Y., company for $4.23 billion in cash and stock, topping a bid by a private equity firm. Bausch & Lomb had agreed in May to sell itself to Warburg Pincus LLC for $3.67 billion (See Warburg Pincus to Buy Bausch & Lomb).

The AMO proposal is "subject to termination of Bausch & Lomb’s previously announced merger agreement with affiliates of Warburg Pincus LLC and the execution of a definitive merger agreement with AMO," Bausch & Lomb said in a statement.

Bausch & Lomb said its board, on the recommendation of a special committee composed of independent directors, "has determined that the AMO proposal is bona fide and is reasonably likely to result in a superior proposal, as defined in the Warburg Pincus agreement. AMO has therefore been designated an 'excluded party' as defined in the Warburg Pincus agreement. By designating AMO an excluded party, Bausch & Lomb is permitted, subject to certain conditions, to continue negotiating with AMO with respect to the AMO Proposal despite the end of the 'go shop' period."

"The Warburg Pincus agreement may be terminated under certain circumstances, including if Bausch & Lomb receives and accepts a better proposal and provides advance notice to Warburg Pincus, Bausch & Lomb said. "If the Warburg Pincus Agreement is terminated under these circumstances with respect to an excluded party such as AMO, Warburg Pincus will be entitled to a $40 million payment from Bausch & Lomb," the agreement states. "Pending further discussions with AMO, Bausch & Lomb’s board, following the recommendation of the special committee of the board of directors, has not changed, and has reaffirmed, its recommendation of Bausch & Lomb’s pending merger with affiliates of Warburg Pincus pursuant to the Warburg Pincus agreement," the statement said.

"We are pleased that B&L's board has determined that our offer is bona fide and is reasonably likely to result in a superior offer," said AMO chairman, president and CEO Jim Mazzo. "We look forward to working with them to reach a definitive agreement as soon as possible and believe our bid represents a strategically and financially superior proposal to B&L's existing merger agreement."

According to the proposal, AMO will have up to 12 months to close the transaction, and that interest would be paid in cash at the rate of 7.2 percent per annum beginning six months after a definitive merger agreement is executed. The proposal is not subject to a financing condition, and AMO has submitted a financing commitment letter. The proposal, which is subject to customary shareholder and regulatory approvals, includes a $130 million reverse termination fee payable by AMO to Bausch & Lomb in the event the transaction does not close due to the failure to obtain requisite financing or antitrust clearance and reimbursement by AMO of Bausch & Lomb’s expenses up to $35 million if AMO fails to obtain the approval of its shareholders. It also provides for a proposed $130 million termination fee to be paid by Bausch & Lomb to AMO in the event that it terminates the agreement with AMO and a proposed reimbursement of AMO’s expenses up to $35 million under the same circumstances, in which case such expenses are reimbursable under the Warburg Pincus agreement.

The special committee and its advisors plan further discussions with AMO regarding the AMO proposal, Bausch & Lomb said. The company said the proposal is subject to shareholders and regulatory approvals, and that "there could be no assurance that the special committee would ultimately find the proposal to be a superior proposal under the merger agreement," that discussions with AMO may be terminated at any time and "that there can be no assurances as to whether the AMO proposal will ultimately result in a transaction with Bausch & Lomb."

"This is a truly unique opportunity that would enable AMO to accelerate our strategic goal of providing a full range of advanced technologies to address the vision needs of patients of all ages," said Mazzo. "The AMO and B&L businesses complement each other and together would provide increased scale, scope and the enhanced ability to generate productivity and efficiency improvements. Through a focus on integrating the best of both businesses, as well as the sale of some noncore assets, our goal is to create a stronger, more competitive combined company with a platform for sustained, profitable growth."

Bausch & Lomb also said Thursday it has named Robert J. Moore corporate vice president and president, US vision care. Moore has had management responsibility for the US contact lens, lens care and over-the-counter eye care businesses since 2004 and was named to its corporate strategy board in January. He rejoined Bausch & Lomb in 2002 as vice president of marketing for the Americas region, after two years with Staples Inc., where he was executive vice president of marketing. He first joined the company in 1989 from Procter & Gamble, where he was a brand manager. During his first tenure with Bausch & Lomb he held executive positions in the US lens care and health care businesses as well as the former Ray-Ban division. He has an MBA in marketing from Harvard University and a BS degree in finance from Pennsylvania State University. 

The company said it will file a proxy statement and other materials with the US Securities and Exchange Commission and that copies will made available at its Web site, at: www.bausch.com