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Mentor Plots Cosmetic Change

Ironically, Mentor's offer for Medicis makes Medicis' offer for Inamed look even better. In March, the Medicis bid was valued at $2.8 billion, or $75 a share, in cash and stock.

After Allergan entered the fray last week, Medicis' stock fell, and the total value of its deal dropped to $69 a share. Now, thanks to Mentor, the Medicis offer is worth just under $76 a share.

That's still not as good as the Allergan offer for Inamed, which is valued at $3.2 billion, or $84 a share in either cash or stock.

Trading in Allergan and Inamed was relatively calm. Allergan, of Irvine, Calif., was down $1.04, or 1%, to $99.21. Inamed, like Mentor based in Santa Barbara, Calif., was off 16 cents to $83.15.

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Some analysts said the Mentor bid was a nice try, but others say it was a doomed proposal. This was a "dead-on-arrival offer," says Amit Hazan, of SunTrust Robinson Humphrey, in a research note. "We are puzzled by both the structure and the timing. The all-stock offer poorly missed the mark."

Hazan cut his rating on Mentor to neutral from buy. "We are now uncomfortable with this management team's ability to use the ensuing proceeds from selling the urology businesses to drive shareholder value," says Hazan. "Indeed, the Medicis offer is indicative of this management's uncertainty with the direction of the business." Hazan doesn't own shares, and SunTrust doesn't have an investment-banking relationship with Mentor.

John Calcagnini of CIBC World Markets says the Mentor bid made strategic sense, giving it access to Medicis' skin care drugs while Mentor continues working on an experimental drug similar to Allergan's Botox. However, Medicis "is intent on buying Inamed and remaining independent," he says.

Calcagnini, who has a sector outperform rating on Mentor, adds that he "would not rule out the possibility" that another company would make a run at Mentor. He doesn't own shares, and his firm doesn't have an investment-banking relationship with Mentor.

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