Advanced Medical Optics Inc., barely two years into life as a standalone company, is gunning to be a powerhouse in vision correction surgery.
And it’s willing to pay to get a bigger piece of the eye surgeon’s office.
Last week the Santa Ana-based eye device and contact lens solution maker said it plans to shell out $1.3 billion in cash and stock to buy Visx Inc., a Santa Clara-based maker of devices for laser vision correction.
Visx’s market value was about $900 million prior to the announcement.
The Visx buy is the second large one this year for Advanced Medical, which paid $450 million to buy Pfizer Inc.’s cataract surgery business in April.
“We have a penchant to grow this company,” said James Mazzo, Advanced Medical’s chief executive. “We’re not shy, and we’ve done a great job of integration.”
Visx’s corrective laser surgery business gives Advanced Medical several ways to profit from the aging population, Mazzo said.
The company, which spun off from Irvine-based drug maker Allergan Inc. in 2002, has been a big maker of microkeratomes, or metal blades to cut the cornea during corrective surgery.
And Advanced Medical recently got approval to sell an implantable lenses that corrects myopia.
|
|
D & #341;vila: will take board seat when deal closes |
The company also sells lasers and intraocular lenses used in cataract surgeries and a line of contact lenses cleaning solution and other products.
With Visx in tow, Advanced Medical stands to have annual sales of $1 billion, up from $600 million in 2003. The deal is one of the county’s biggest this year, behind Teva Pharmaceutical Indus-tries Ltd.’s $3.4 billion buy of Irvine drug maker Sicor Inc.
Visx was founded in 1988. Its products include Star, a laser that removes corneal tissue to correct a patient’s vision, and CustomVue, a laser system that allows eye surgeons to make customized corrections based on measurements of optical errors, such as astigmatism, nearsightedness or farsightedness.
“By taking advantage of (Advanced Medical’s) global distribution network, we can expand our laser vision correction business into new markets,” said Visx Chief Executive Elizabeth D & #225;vila, who is set to be a director at Advanced Medical.
Visx’s sales have fallen in recent years as laser vision surgery declined from a peak in the mid 1990s. In 1999, the company reported record revenue of $271 million. Last year sales were $144 million.
For the nine months through Sept. 30, Visx reported sales of $126 million. Operating profit more than doubled to nearly $49 million during the period.
Wall Street hit Advanced Medical pretty hard on the news, with its shares falling 9% to $39. The company’s market value was $1.4 billion as of last week.
Michael Lachman, an analyst with San Francisco-based investment bank Think- Equity Partners, called the reaction predictable.
“When a company announces a sizable acquisition, the stock of the acquiring company goes down because people get concerned about earnings dilution, debt, integration issues and the like,” he said.
For investors, a key concern is that Advanced Medical is paying “a pretty hefty premium over where Visx stock had been trading in recent days,” Lachman said.
But the analyst also said buying Visx betters Advanced Medical against its bigger rivals. They include Alcon Inc., the Fort Worth, Texas-based unit of Nestle SA that employs more than 500 people in Irvine, and Rochester, N.Y.-based Bausch & Lomb Inc.
“This is a very good fit,” Lachman said. “It’s a match that I’ve talked about on and off for a long time.”
Joanne Wuensch, an analyst with Harris Nesbitt, a New York-based investment bank, downgraded Advanced Medical in a research note after the deal was announced.
“The acquisition appears to us to be too soon after the Pfizer acquisition,” she wrote.
Still, Wuensch said that the deal ultimately could be positive for Advanced Medical.
Advanced Medical’s Mazzo said the stock and cash deal wouldn’t put pressure on the company’s debt load.
“Both companies are strong, cash-rich companies, so (debt’s) a very small number,no issue at all,” he said.
The combined company will retain the Advanced Medical name and Santa Ana headquarters. Visx’s laser device operations will remain intact in Santa Clara, Mazzo said.
The deal has been approved by both boards and is set to close in early 2005. Visx President Doug Post will become president of Advanced Medical’s Americas region.
Visx employs some 330 people to Advanced Medical’s 2,800 workers.
Integration “was a major point to think about before agreeing to merge with another company,and a much larger company,” D & #225;vila said.
The combined company will emphasize Advanced Medical’s direct sales model to target international physicians versus Visx’s use of distributors, Mazzo said.
