Activist shareholder attempts to scupper AMO Bausch & Lomb bid(2)

Warburg Pincus’ bid for Bausch & Lomb looked more likely, as trade buyer Advanced Medical Optics’ third largest shareholder ValueAct Capital criticised the risk involved in the healthcare company’s higher counter bid.

Trade buyer Advanced Medical Optics’ proposed $4.3 billion (€3.2 billion) bid for optics company Bausch & Lomb was in jeopardy yesterday. Its third largest shareholder ValueAct Capital filed a letter with the US Securities and Exchange Commission objecting to the deal on grounds of risk.

The $75 per share bid, which had trumped global buyout firm Warburg Pincus’ earlier $65 per share accepted offer, had led to an extension of Bausch & Lomb’s go-look period agreed with the buyout firm in May.

ValueAct, which owns a 14.8 percent stake in AMO, objected the acquisition would need large amounts of debt thereby increasing the margin for error, as well as exposing the company to a riskier business.

The letter addressed to AMO’s chairman, chief executive and president James Mazzo also questioned the regulatory risk involved.

It also criticised Mazzo and the company’s management: “We might feel differently had you demonstrated an ability to deliver in the past, but a B&L acquisition in your hands is simply too big a leap of faith in light of your public track record.” It said the company’s failure to meet any share price targets it had set for the years 2005 to 2008 was an indication of this. 

According to news agency Reuters Mazzo said the letter was surprising as the activist investor had expressed interest in investing $700 million in equity in the merger in June as well as reaffirming its interest on July 5.

He claimed the letter contained “numerous inaccurate and misleading statements about the proposed transaction that we feel compelled to address.”

The activist investor’s statement that buyout firms had so far avoided a partnership because of regulatory concerns was, he said, a misrepresentation of conversations between ValueAct and AMO. Instead the healthcare business had not sought private equity partners on the bid. 

The company could also address the activist investors’ regulatory concerns “in a timely manner.”