Wesley Jessen in Talks With Third Party

Updated from 9:53 a.m. EDT

Wesley Jessen VisionCare

(WJCO)

said Monday that it was in talks with a third party about a possible transaction. The maker of specialty soft contact lenses is already the subject of a hostile bid by

Bausch & Lomb

(BOL)

as well as a party to a merger agreement with

Ocular Sciences

(OCLR) - Get Report

.

The talks are being conducted with the consent of Ocular Sciences, while the merger agreement remains in effect, according to Wesley Jessen, which is based in Des Plaines, Ill.

Last week, Wesley Jessen rejected Bausch & Lomb's $600 million all-cash

bid of March 23 but said it would talk with the company. That bid was an attempt to pre-empt the $413 million all-stock

merger deal between Wesley Jessen and South San Francisco, Calif.-based Ocular Sciences announced on March 20, which would form the second-largest soft contact lens company in the world.

Because Ocular Sciences has approved the talks, it's likely that the third party is discussing the possibility of buying both companies and saving the merger. That third party could be either

Alcon Laboratories

, a subsidiary of Switzerland's

Nestle

(NSRGY) - Get Report

, or

Allergan

(AGN) - Get Report

.

"The most interesting development today is that a company's talking about buying the whole thing," said Bruce Jacobs, an analyst at

Deutsche Banc Alex. Brown

. He rates Wesley Jessen a strong buy and his firm took the company public.

Both Alcon and Allergan make eye care products, including contact lens solutions and cleaners. They are obvious candidates because "you can make an argument that there are some synergies to the solutions and contact lens businesses," Jacobs added.

In addition, there are few other players in the contact lens industry. Bausch and Lomb has already made its bid. And there is much overlap between

Johnson & Johnson

(JNJ) - Get Report

and Ocular Sciences, which compete directly against each other.

Even so, that doesn't stop some analysts from speculating that Johnson & Johnson might still swoop in and buy Wesley Jessen, breaking up the merger. After all, Johnson & Johnson can afford to pay a great deal of money for Wesley Jessen alone, including payment of the hefty terms of a breakup. Under those terms, Ocular Sciences could receive as much as $20 million in cash and a certain amount of options. A Johnson & Johnson spokesman, Jeff Leebaw, refused to comment.

Johnson & Johnson is the No. 1 maker of soft contact lenses by revenue. Bausch & Lomb, based in Rochester, N.Y., is the No. 1 maker of soft contact lenses by market share.

Shares of Wesley Jessen were up 1 11/16, or 5%, to 38 7/8, while Ocular Sciences shares were at 16 3/8, up 2 7/16, or 17%. At those prices, Ocular Science is valued at $28.03 a share, a 71% premium. (Wesley Jessen closed up 2 3/16, or 6%, at 39 3/8 while Ocular Sciences closed up 2 9/16, or 18%, at 16 1/2.)

Shares of Bausch & Lomb were up 2 3/16, or 4%, to 56 1/4. (Bausch & Lomb closed up 2 3/4, or 5%, at 56 13/16.)