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Advanced Medical Optics has made a $4.3 billion counteroffer for Bausch & Lomb to rival the $3.7 billion deal Bausch signed with Warburg Pincus on May 16. Bausch shares gained 4.9% to close at $72.00 on the news. Advanced Medical has bid $45 in cash and $30 in stock per share, 16% more than Warburg's $65 all-cash bid. "It's hard to find a way to argue that $75 isn't superior to $65," said Robert Baird analyst Jeff Johnson. Before accepting the higher bid, however, Bausch's board will have to consider antitrust issues that may be implicit in the combination. In addition, the transaction could be subject to the approval of Advanced Medical's shareholders. According to the WSJ, the deal might be advanced by the re-entrance into Advanced Medical's buying group of either Goldman Sachs's private equity unit or KKR. EYE 06 July 2007 BOL 06 July 2007If that occurs, it would mark a diversion from the traditional "gentlemen's agreement" among private equity firms not to sabotage one another's signed deals. Advanced Medical wants Bausch for its contact lens and eyeglasses lines, which would complement its own product line of eye solutions and laser vision correction tools.

Sources: Wall Street Journal, MarketWatch, Bloomberg, Reuters
Commentary: Bausch & Lomb To Be Taken Private for $4.5B; Traders Anticipate Higher BidsAdvanced Medical Optics Considering Offer for Bausch & LombAdvanced Medical Optics: Shares Plummet on MoisturePlus Recall
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 Tops Warburg Pincus's Bid for Bausch & Lomb