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Mentor Plots Cosmetic Change

The prospective reshaping of the cosmetic-medicine sector had already created plenty of drama in recent days, but now there's a new wrinkle in what has become a four-player saga.

On Sunday, Mentor (MNT) made things a little more interesting, offering $2.2 billion for Medicis Pharmaceutical (MRX). Upon learning of the proposal, Medicis' board members immediately rejected it and reaffirmed their own desire to continue pursuing Inamed (IMDC).

Meanwhile, Inamed, Mentor's main rival in the field of breast implants, is being sought by Allergan (AGN), whose bid Inamed's board seemed happy to receive last week .

Allergan and Medicis want Inamed's existing and experimental skin-treatment products. Medicis hopes to expand its skin-care and skin-disease offerings, while Allergan is aiming to fortify its Botox business and to repel challenges from Medicis. Allergan's exchange offer for Inamed began Monday.

Mentor likes Medicis for its skin-treatment business, which it believes has better prospects than its own urological products. Mentor has hired an investment bank to explore options for its urology businesses.

The fight could become even more complicated. After Allergan made its bid for Inamed, analysts began speculating that someone would try to buy Mentor, of Santa Barbara, Calif. That speculation hasn't diminished.

Into the Fray

By early afternoon, shares of Mentor were down $4.89, or 8.7%, to $51.25 as some analysts said its bid was the weakest of all the proposals. More than 1.7 million shares traded, or triple the daily average for the past three months.

Medicis jumped $4.34, or 15.6%, to $32.09, on nearly four times the average daily volume for the past three months.

Mentor offered 0.62 shares for each Medicis share, implying a value of $34.69 a share. That's 25% higher than the Scottsdale, Ariz., company's closing price on Friday.

Joshua H. Levine, Mentor's chief executive, said that even though his stock-swap offer would give Medicis shareholders a 44% stake in the combined company, he would be willing to add cash to the formula to make the proposal more palatable. He didn't offer a precise figure, saying only that the cash component could be "significant or substantial."

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