Updated from 8:58 a.m. EST

Wesley Jessen VisionCare

(WJCO)

announced Monday that it will buy rival

Ocular Sciences

(OCLR) - Get Report

in an all-stock deal valued at about $413 million, forming the second-largest soft contact lens company in the world.

In Monday morning trading, shares of Wesley Jessen were down 2 1/4, or 9%, to 22 3/4. They are down 18% in the last six months. Ocular Sciences shares were down 11/16, or 4%, to 16 1/4. Over the last year, they are down 33%.

Wesley Jesson shares are likely down because its shareholders may be disappointed with the deal. They may have bought shares of the company in the hopes that

Johnson & Johnson

(JNJ) - Get Report

, the No. 1 maker of soft contact lenses by revenue, would acquire the company. The Ocular Sciences transaction makes such an acquisition less likely.

Under the terms of the agreement, Wesley Jessen will exchange 0.721 share of its stock for each share of Ocular Sciences stock. That values Ocular Sciences at $18.03 a share, a premium of 6% to the company's closing price Friday of 16 15/16.

"Both companies have been talked about as candidates for consolidation because they both have attractive elements to their product line," said analyst Andrew Jay of

TheStreet Recommends

First Union Securities

. He rates Wesley Jesson a strong buy and his firm has done no underwriting for the company.

The two contact lens makers focus on different areas of the market. Wesley Jessen is the No. 1 developer, manufacturer and marketer in the $750 million specialty soft contact lens market, which includes cosmetic lenses that change or enhance the wearer's eye color. Ocular Sciences, based in South San Francisco, Calif., also manufactures and markets soft contact lenses, including a comfortable clear disposable lens that also has been gaining share in the marketplace.

Together, the two companies have combined sales of just under $500 million in 1999.

The acquisition gives Wesley Jessen a broader product line, enabling its direct sales force to have a "more complete product line to sell and maximizing productivity of their sales calls," Jay commented.

The new company will take the Wesley Jessen VisionCare name and continue to be based in Des Plaines, Ill. Kevin Ryan, currently chairman, president and chief executive of Wesley Jessen, will be president and chief executive of the new company. John Fruth, the founder and chairman of Ocular Sciences, will be non-executive chairman of the new company.

The transaction is expected to be accretive to Wesley Jessen's fully diluted earnings per share, excluding one-time charges in the first full fiscal year after the combination. The merger is expected to close in the second quarter of 2000.

This deal is the second example of consolidation in the contact lens industry. The first occurred in December 1997 when

The Cooper Companies

(COO) - Get Report

acquired the U.K.'s

Aspect Vision Care

, a privately held manufacturer of contact lenses, integrating it into Cooper's

CooperVision

contact lens business.