Wesley Jessen Rejects Second Bausch & Lomb Offer

Updated from 11:54 a.m.

The eyes don't have it ... yet.

Wesley Jessen VisionCare (WJCO Quote) has rejected a second, semi-sweetened overture from Bausch & Lomb (BOL Quote), recommending Friday that its shareholders not tender their shares at this time.

Bausch & Lomb, the No. 1 maker of soft contact lenses by market share, raised its earlier bid on Monday to $35.55 a share in cash, in its attempt to buy Wesley Jessen, rather than allowing the specialty contact lens maker to acquire Ocular Sciences (OCLR Quote).

A successful bid would give Bausch & Lomb the leading position in the $300 million worldwide cosmetic contact lens market. The combination of Wesley Jessen and Ocular, meanwhile, would create the second-largest contact lens company by revenue behind Johnson & Johnson (JNJ Quote).

The latest offer from Rochester, N.Y.-based Bausch & Lomb, valued at $626.4 million, is a 5% premium to its bid of $34 a share in cash, made on March 23. The new offer was disappointing to investors and analysts who estimated the price would easily reach at least the high $30's.

"Bausch & Lomb is adamant that the offer will not be extended and is adamant about the price it is willing to pay," said Charles Olsziewski, an analyst at PaineWebber. "At their analyst meeting, the company went out of its way to characterize this as its best and final offer." He rates Bausch & Lomb a buy and his firm has done no underwriting for the company.

Meanwhile, Wesley Jessen's agreement to buy Ocular Sciences, based in South San Francisco, Calif., is now worth $547 million, 32% more than it was worth when the all-stock deal was announced on March 20. The increase is largely a result of a big upswing in the stock price of Wesley Jessen, based in Des Plaines, Ill., since Bausch & Lomb's interest became known. Shares of Wesley Jessen were up 1 1/2, or 5%, to 32 5/8 around midday Friday. (Wesley Jessen closed up 2 3/4, or 9%, at 33 7/8.)

Wesley Jessen also said Friday that it was continuing its discussions with a third party over a possible purchase of both it and Ocular Sciences, but in a statement, the company warned that "there can be no assurance that they will lead to any agreements or understandings, or if any agreements or understandings are reached, that any transactions will be consummated." The talks were announced last month.

There is much speculation that the third parties could be Johnson & Johnson or lens care product makers Allergan (AGN Quote) or Alcon Laboratories, a subsidiary of Nestle (NSRGY Quote) of Switzerland.

Olsziewski makes the case that Alcon/Nestle, Wesley Jessen and Ocular Sciences could benefit from tremendous synergies. Wesley Jessen makes cosmetic lenses that change or enhance the wearer's color and Nestle holds a stake in cosmetic giant L'Oreal. "Contact lenses are as much a fashion business as anything else, since cosmetic lenses are the second-largest growth segment," he said. "This makes Alcon more palatable."

Shares of Ocular Sciences were up 1/4, or 2%, to 15 7/8 in Friday afternoon trading, while shares of Bausch & Lomb were down 1/2, or 0.8%, to 66. (Ocular Sciences closed up 11/16, or 4%, at 16 5/16, while shares of Bausch & Lomb closed down 1/8 to 66 1/2.)