June is turning out to be a big month for corporate marriage in the contact lens industry, but its a rocky road to the altar for Bausch & Lomb as its suitors are faced with product recalls and shareholder lawsuits.

On May 16, B&L announced that it had entered into a definitive merger agreement with affiliates of Warburg Pincus, a global private equity firm. Warburg Pincus would acquire the outstanding shares of B&L for $65 a share, a transaction valued at approximately $4.5 billion.

As a private company, Bausch & Lomb will have greater flexibility to focus on our long-term strategic direction to be a global leader in providing innovative and technologically advanced eye health products to eye care professionals and consumers, Ronald L. Zarrella, chairman and CEO of B&L said.

The following week, Advanced Medical Optics announced that it would explore making a superior offer for B&L. The merger agreement with Warburg Pincus gave B&L 50 days in which it could solicit superior proposals.

We believe it is only logical to explore this opportunity given the highly complementary nature of our two businesses, AMO said in a written statement. Consideration of this potential transaction is consistent with our existing strategy to provide a full range of products that addresses vision care needs of people of all ages.

Christopher Cooley, an analyst with Ftn. Midwest Securities Corp., agrees. You really have two different suitors, he says. One is a pure financial player (Warburg Pincus), and the other a strategic acquirer (AMO). By acquiring Bausch & Lomb, AMO could expand its offerings of contact lens care products and IOLs, he says. Plus, the acquisition would allow AMO entry into new marketsnamely contact lenses and pharmaceuticals.

Also, there would likely be some overlap from a sales standpoint, which might offer the companies cost savings. The result, Mr. Cooley says, could mean improved customer service and an increased focus on higher-end technology.

But, AMO may have hit a bump in the road. A day after it confirmed its interest in acquiring B&L, AMO voluntarily recalled its Complete MoisturePlus contact lens solution.

In published reports, analysts say this recall could end AMOs bid for B&L, which last year recalled its ReNu with MoistureLoc contact-lens cleaner after it was connected to an outbreak of Fusarium keratitis. Shares of B&L dropped following the AMO recall.

Meanwhile, the Rochester Democrat and Chronicle has reported four shareholder lawsuits to stop the sale of B&L to Warner Pincus.

As of press time, B&L stock sold for $68.15 a share, and AMO stock sold for $35.82 a share. Either possible transaction could mean a financial windfall for shareholders.

Vol. No: 144:06Issue: 6/15/2007