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Shares of Bausch & Lomb gained 5.7% to close at $70.21 Thursday after Advanced Medical Optics said it is interested in bidding for the company. Advanced Medical's shares fell 3.2% to $41.10. Last week, Bausch agreed to be acquired by private-equity firm Warburg Pincus for about $3.67 billion, or $65 a share. Eye-care product manufacturer Advanced Medical, which has half the sales of Bausch, claims its offer is superior to Warburg's because the combination would provide cost synergies. Last spring, Bausch was forced to recall its ReNu with MoistureLoc contact-lens cleaner after it was connected to a series of eye infections. Advanced Medical, too, had to withdraw 2.9 million units of its Complete MoisturePlus solution on fears of bacterial contamination. Advanced Medical bought laser eye surgery device firm VisX Inc. for about $1.25 billion last year, and last month, it purchased vision-correction laser manufacturer Intralase Corp. After those acquisitions, Advanced Medical is "far and away the leader in the refractive surgery market," according to Robert W. Baird analyst Jeff Johnson. Some believe Warburg will not be content with the $40 million break-up fee if Bausch accepts Advanced Medical's as-yet unquantified bid. FTN Midwest Securities analyst Chris Cooley: "As Advanced Medical moves forward...there's a good likelihood you could see Warburg revisit their $65 offer."

Sources: Wall Street Journal, Chron.com, Bloomberg, Reuters, MarketWatch
Commentary: Bausch & Lomb To Be Taken Private for $4.5B; Traders Anticipate Higher BidsBiotech Buyout Frenzy ContinuesBausch & Lomb Could Be Heading Toward a Buyout, But Based On What?Advanced Medical Optics: ValueAct Capital Discloses 7.3% Stake
Stocks/ETFs to watch: Advanced Medical Optics, Inc. (EYE), Bausch & Lomb Inc. (BOL). Competitors: Alcon Inc. (NYSE:ACL), Cooper Companies Inc. (NYSE:COO)

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Source: Advanced Medical Optics Considering Offer for Bausch & Lomb