Jeffrey Ubben is used to getting his way.
The managing partner of San Francisco-based activist hedge fund ValueAct Capital LP has emerged as the main hurdle to Advanced Medical Optics Inc.’s $4.2 billion bid for rival Bausch & Lomb Inc.
Ubben, whose firm owns 15% of Santa Ana-based Advanced Medical and is its third-largest shareholder, has come out against the deal.
That prompted Rochester, N.Y.-based Bausch & Lomb to say last week it’s more likely to go with a $3.67 billion bid to go private in a buyout by private equity firm Warburg Pincus LLC.
Ubben’s stance also has put him at odds with two Bausch & Lomb shareholders, who last week came out in favor of the Advanced Medical offer.
Late last week, Advanced Medical reaffirmed it’s offer and said it would increase a breakup fee from $35 million to $50 million in the event a deal didn’t go through. The company also suggested having its shareholders vote on a deal first to possibly ease Bausch’s concerns about support.
Earlier this month, ValueAct came out firing against Advanced Medical’s bid, contending that a deal would expose the company to “unnecessary risk.” It also raised doubts about the company’s ability to integrate Bausch.
Both companies make eye surgery devices and contact lens solutions. Advanced Medical had a recent market value of $2 billion, versus $3.5 billion at Bausch & Lomb.
ValueAct went as far to say earlier this month that Advanced Medical’s bid was “dead” and that other large shareholders, which it didn’t name, were against it.
FMR Corp.’s Fidelity and MFS Investments are Advanced Medical’s two largest shareholders.
Ubben didn’t return several calls for comment last week.
Bausch spokesman Michael McDougall said his company didn’t have any comment beyond a letter last week from director William Waltrip.
The letter said Bausch’s board planned to reject Advanced Medical’s bid “without further assurances as to value and certainty of consummation, and in particular, without concrete, credible evidence that holders of a significant percentage of the outstanding AMO shares would affirmatively support the proposed acquisition of Bausch & Lomb by AMO.”
The letter raised the ire of two Bausch shareholders.
New York-based Healthcor Management LP said it would vote against the Warburg bid and urged Bausch to accept Advanced Medical’s bid.
Healthcor, which manages private and public equity funds worth more than $2 billion, owned 1.45 million shares, or about 2.7% of Bausch as of March 31.
“While we recognize that the AMO offer will be more time-consuming and potentially more difficult to consummate, we believe it is the right one to accept,” Healthcor said in a statement.
And Sandell Asset Management Corp., a New York hedge fund that owns about 700,000 shares, or 1.3% of Bausch, said last week that it would vote against the Warburg bid. Concerns about Advanced Medical’s offer could be resolved, it said.
Sandell, in a letter to Bausch, said it believed Advanced Medical’s cash and stock bid is superior to Warburg’s all-cash offer.
Bausch was unnecessarily dismissing the Advanced Medical proposal in favor of a transaction that significantly undervalued the company, the letter said.
“It is our belief that the Warburg offer undervalues Bausch & Lomb and it is our intention to vote against the transaction as proposed,” said Thomas Sandell, Sandell’s chief executive.
Scuttling Advanced Medical’s bid would be a big notch in ValueAct’s belt.
The firm is known as an activist investor that urges management to make changes aimed at boosting a company’s value. In the past, it was known for targeting companies caught up in accounting issues, as well as late federal filers.
ValueAct, which manages some $1.5 billion for institutional and wealthy shareholders, is no stranger to OC companies. In the past, it invested in the TriZetto Group Inc., the Newport Beach healthcare technology company.
In 2004, ValueAct offered $275 million to MSC.Software Corp. of Santa Ana to take the industrial software maker private after it hit accounting troubles. ValueAct made its offer after buying about 10% of MSC’s shares.
MSC rejected ValueAct’s offer but agreed to add directors to the board, including Bill Weyand, now its chief executive.
ValueAct eventually backed off its buyout bid and sold off most of its stake in MSC.
In May, ValueAct and Silver Lake Partners of Menlo Park spent $3 billion to take private Acxiom Corp., a Little Rock, Ark.-based database marketing company.
The Acxiom deal came some two years after ValueAct invested about $200 million in the company. After seeing Acxiom’s stock price drop, ValueAct sought a seat on the company’s board.
Acxiom rebuffed the request and another to take over the company. Ubben then launched a proxy battle that was dropped last year in exchange for gaining a board seat and a $300 million stock buyback.
Ubben’s past also includes a stint as a director and chairman of Martha Stewart Living Omnimedia Inc. He served as the company’s chairman for 14 months, taking the job in 2003 after Stewart was indicted on charges that she lied to federal investigators about a private stock transaction.
Ubben stepped down from that position in 2004 but remained on Martha Stewart Living Omnimedia’s board before selling his remaining shares of the company in 2005, seeing a $34 million profit in the process.
Before cofounding ValueAct in 2000, Ubben was a managing partner at Blum Capital Partners, a San Francisco private equity firm. He started his career at Boston-based Fidelity, where he managed the Fidelity Value Fund.
