Warburg Pincus set to win Bausch & Lomb

The buyout firm’s $3.67 billion take-private bid for the UK eyecare business looks set to succeed, after its major trade rival pulled its higher bid following a bad-tempered exchange.

Buyout firm Warburg Pincus is set to win the battle for US-listed eyecare business Bausch & Lomb, after rival trade bidder Advanced Medical Optics withdrew its competing offer.

AMO withdrew its $4.23 billion (€3.10 billion) offer after the board of B&L refused to grant it more time to prove it had sufficient shareholder support for its $75 per share bid. On Monday it had asked for more time to consult with shareholders so it could share some non-public information about the offer, but the B&L board turned down this request yesterday.

In a filing with the US Securities and Exchange Commission, B&L said it had consulted with some of AMO’s biggest shareholders and concluded: “We continue to believe that there is substantial uncertainty that AMO could obtain the approval of its stockholders”.

AMO reacted angrily, withdrawing its bid and denouncing the Warburg Pincus offer as a “transaction that is inferior… both in terms of value and the ability for the Bausch & Lomb shareholders to participate in the significant synergies that combining AMO and Bausch & Lomb would create.” It closed its letter to B&L: “If, in the future, you decide to run a process that is designed to deliver value to your shareholders, please let us know.”

In May B&L agreed to a $3.67 billion buyout offer from Warburg Pincus, equivalent to $65 per share, only for this to be trumped by AMO’s subsequent $75 per share bid, which consisted of $45 in cash and $30 in AMO stock.

However, B&L showed no inclination to drop its support of the Warburg Pincus offer, particularly after ValueAct Capital, an activist investor that owns 14 percent of AMO, expressed strong opposition to the AMO offer last month.

The eyecare firm’s latest filing reveals an exchange of increasingly bad-tempered letters between the two companies, after B&L wrote to AMO arguing the latter had failed to provide enough information and needed to sweeten its offer. AMO’s subsequent request for more time to consult its shareholders was turned down, and its suggestion of an increase in the penalty fee from $35 million to $50 million dismissed as “inadequate”.

Any potential tie-up between AMO and B&L could also have fallen foul of antitrust regulators, since both companies operate in the same sector – an issue that would not apply to a Warburg Pincus buyout.

Bausch & Lomb shares closed down 2.2 percent at $62.54 on the New York Stock Exchange yesterday.