Less noise, more cash appears to be the winning formula for landing Irvine-based eye-drug maker Ista Pharmaceuticals Inc.
Now comes figuring the future.
Ista last week announced its sale to Rochester, N.Y.-based Bausch & Lomb Inc.—which makes eye drugs and devices as well as contact-lens care products—for about $500 million, or $9.10 a share. The deal had no advance fanfare and came about two months after Ista rejected a pair of well-publicized and unsolicited takeover bids from Valeant Pharmaceuticals International Inc. in Canada.
Valeant’s top bid came to about $360 million.
Bausch Chief Executive Brent Saunders, in a memo to employees filed with the Securities and Exchange Commission, said he has tapped Dan Wechsler, a Bausch executive vice president and president of its Madison, N.J.-based global pharmaceutical unit, to oversee Ista’s integration into that unit.
Ista lost $56 million on $160 million in sales last year. It has about 330 workers, with more than 120 of them in Orange County. It makes a number of eye drugs including Bepreve for eye allergies and Bromday, which is used to treat pain after cataract surgery. It also has several drugs in its pipeline including Prolensa for treating eye pain
Joint Effort
An email from Wechsler to workers in Bausch’s drug unit said the effort would include leaders from both companies.
Both Bausch and Ista said in a filing it would be “premature to speculate about redundancies or layoffs” before the integration is done.
Bausch is putting hiring for administrative positions “on-hold for the time-being” at its eye-surgery products unit in Aliso Viejo, where it now has about 160 workers.
“This is a necessary and important step, which will be helpful when it comes time to bring our two organizations together,” Wechsler said.
The memo said that is “premature to speculate how this might impact [Ista’s] facility” in Irvine.
Bausch recently had another change in the surgical business: It’s looking for a new top executive to replace Robert Grant, who left in December.
Grant recently went from director to chairman of Myoscience Inc., a Bay Area startup that is developing a medical device using 27-gauge needles to place cryogenic material onto a patient’s face, where it disrupts nerves that allow facial muscles to form wrinkles.
Saunders has overseen Bausch’s surgical business since Grant’s departure, spokeswoman Elizabeth Murphy said.
Bausch’s buy of Ista, which has been approved by both companies’ boards, is expected to close this quarter, pending regulatory and shareholder approval. It is buying Ista because the company offers “an excellent strategic fit with (our) rapidly growing pharmaceutical business,” Saunders said.
The companies “have known each other well for many years,” because Bausch manufactures nearly all of Ista’s current drugs, he said.
Ista Chief Executive Vince Anido said he was “pleased that the tremendous assets Ista’s people have created with our products and pipeline have been recognized by Bausch & Lomb.” He added that Ista was able to finalize a deal “after a thorough process that delivers shareholders an important return on their investment in Ista.”
Bausch moved quietly on Ista. The company’s offer valued Ista at 10% more than its market capitalization on March 26, the day it was announced.
• Headquarters: Irvine
• Business: eye-drug maker
• Founded: 1992
• Ticker symbol: ISTA (Nasdaq)
• Market value: about $377.6 million
• Notable: sale to Bausch & Lomb expected to close this quarter
134% Premium
That’s a 134% premium from Ista’s share price on Dec. 15, a day before it received the first proposal from Valeant. And it’s 40% higher than the proposed price in Valeant’s first bid for Ista.
Valeant walked away from its effort at the end of January because of a lack of progress in talks. Ista contended that Valeant’s offers undervalued it.
The Bausch offer “seems reasonable, although not as high as we hoped for,” said Jason Kantor and Adnan Butt, analysts for Toronto-based RBC Capital Markets who work out of San Francisco.
“We believe the Street was looking for a [per share price] in the high single to low double digits,” Kantor and Butt wrote.
Anido’s reaction on Bausch was milder than back in January, when he criticized what he said was Valeant’s “threat, repeated by your financial advisors, to move unilaterally and make an offer directly to our shareholders—a move which could obviously be destabilizing to our employees and our business.”
No Other Bidders Seen
Wall Street doesn’t expect any other bidder to emerge for Ista.
“Although a competing offer is potentially still an option until closing, we believe that chances of such are low,” said Annabel Samimy, an analyst who follows Ista for St. Louis-based Stifel Nicolaus.
Any such offer would likely come from “an ophthalmic player similar to Bausch & Lomb, to whom Ista represents a strong strategic fit,” Samimy said in a research note.
RBC analysts Kantor and Butt said they believe Ista “ran a full process but await details expected in the proxy statement.”
Bausch will pay for Ista with a combination of cash on hand and proceeds of a $350 million incremental term loan, according to its filing. Bausch’s filing said it had financial commitments from Citigroup Global Markets Inc., JPMorgan Chase Bank, N.A., Credit Suisse AG, Goldman Sachs Bank USA, and Bank of America Merrill Lynch.
The deal has already drawn the attention of law firms that represent shareholders in class-action lawsuits. More than 10 such firms said after the announcement that they would investigate it.
