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Wall Street Pans Advanced Medical's Possible Bausch & Lomb Bid

Bausch & Lomb has already agreed to a $3.67 billion buyout by Warburg Pincus but can solicit superior proposals from third parties for a limited time period.

NEW YORK (AP) - Analysts on Friday said Advanced Medical Optics Inc. will likely face tough times if it successfully bids for Bausch & Lomb Inc.
 
Bausch & Lomb, which makes contact lenses and other eye-care products, has already agreed to a $3.67 billion buyout by private equity firm Warburg Pincus. But Advanced Medical, which makes laser eye surgery devices, on Thursday said it might make a higher offer.
 
Lehman Brothers analyst Matthew Blackman kept an ''Equal Weight'' rating on Advanced Medical. ''Because the financial and integration hurdles are significant and the potential payoff well into the future, we feel that Advanced Medical will likely remain at or below current levels for the foreseeable future if it makes a successful bid for Bausch & Lomb,'' wrote Blackman, who noted that integration issues would include a turnaround for Bausch & Lomb.
 
Citigroup analyst Andrew Swanson in a client note said a combination would likely reduce Advanced Medical's earnings through 2009, if the integration goes smoothly. ''With an already heavy debt load, we assume Advanced Medical would need to immediately divest both Bausch's surgical business and its contact lens care solution (which we note remains tainted by Moistureloc),'' the analyst wrote. He kept a ''Sell'' rating on shares.
 
Under the existing agreement, Bausch & Lomb can solicit superior proposals from third parties for a limited time period, but would owe a $40 million breakup fee to affiliates of Warburg Pincus if it accepts any other offer.
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