Seeing eye to eye

MADISON, N.J.—Bausch + Lomb and ISTA Pharmaceuticals, Inc.have announced the signing of a definitive agreement under which Bausch + Lombwill acquire ISTA for $9.10 per share in cash, for a total of approximately$500 million. both companies' boards of directors approved the transaction.

The price tag represents a 10 percent premium over ISTA'slast share price when the market closed on March 23. What seemed to seal thedeal for ISTA was that it also represents a 40 percent premium over theproposal ISTA received from Valeant Pharmaceuticals. ISTA first announced thatit had received an unsolicited, non-binding proposal from Valeant on Dec. 16,2011, in which Valeant proposed the acquisition all of ISTA's outstandingshares for $6.50 per share, subject to due diligence. After reviewing theoffer, ISTA's board of directors rejected it as being "grossly inadequate" andannounced that it would be conducting a strategic review to determine the bestoptions for the company. Anido and Richard C. Williams, chairman at ISTA, metwith Valeant's chairman and CEO on Jan. 11 to discuss Valeant's offer, and onJan. 17, ISTA announced that Valeant had revised its proposal to $7.50 pershare, though Bausch + Lomb's offer obviously emerged as the most attractive.

"ISTA is an excellent strategic fit with Bausch + Lomb'srapidly growing pharmaceutical business, and this combination represents animportant step in Bausch + Lomb's commitment to becoming the best global eyehealth company. Because Bausch + Lomb already manufactures nearly all of ISTA'scurrent U.S. products, our companies have known each other well for manyyears," Brent Saunders, president and CEO of Bausch + Lomb, said in a pressrelease. "We share a strong overlapping customer base in the U.S., a commitmentto serving our physicians and patients and a track record of developingmeaningful medical advances in eye health. With this combination, we willsignificantly enhance our pharmaceutical pipeline, nearly doubling the numberof mid- to late-stage innovations. We look forward to delivering the benefitsof this combination to customers, patients, employees and partners of bothcompanies."

ISTA brings with it a product portfolio of non-steroidal,anti-inflammatory, allergy, glaucoma and spreading agents. The company also hasseveral drug candidates in development in its pipeline, including two forallergic rhinitis, both in Phase II development; one for ocularinflammation/infection in Phase III development; and one for age-relatedmacular degeneration approaching Phase II. All indications are looking atmarket sizes of at least $150 million by the year 2015, according to ISTA'sestimates.

"Along with the rest of our Board of Directors, I ampleased that the tremendous assets ISTA's people have created with our productsand pipeline have been recognized by Bausch + Lomb, a global leader in eyehealth, and that we were able to finalize a transaction after a thoroughprocess that delivers shareholders an important return on their investment inISTA," Vicente Anido, Jr., Ph.D., president and CEO of ISTA, said in apress release. "Both companies have a significant commitment to servingthe needs of the healthcare industry, eye care professionals and patientsalike. ISTA's portfolio of prescription eye and allergy products is a naturalextension of Bausch + Lomb's pharmaceutical business focus. Together, we createan impressive platform to commercialize new eye care and allergy productsalready under development."

The transaction is expected to close in the second quarterof this year, subject to customary closing conditions, regulatory approval andapproval from ISTA's shareholders. Bausch + Lomb expects it to be accretive toits EBITDA in the first year after close.

Bausch + Lomb brought on Goldman, Sachs & Co. as financialadvisor for the transaction and Cleary Gottlieb Steen & Hamilton LLP aslegal counsel. ISTA brought on Greenhill & Co. as its financial advisor andStradling Yocca Carlson & Rauth and WilmerHale LLP as its legal counsel.