FOOL PLATE SPECIAL
An Investment Opinion
By
Bausch & Lomb, already strong in the non-tinted department, last night boosted its cash tender offer for Wesley Jessen to $35.55 per share, or about $622 million, from its previous bid of $34. Wesley Jessen shareholders weren't pleased. Most were holding out for a better deal, with only about 23,000 shares tendered in response to Bausch & Lomb's offer -- out of about 17.5 million outstanding -- as of yesterday.
But did Wesley Jessen play it too tough with Bausch & Lomb? As reported in this Fool News article about a month ago, the companies were talking about a deal earlier this year that would have given Wesley Jessen stockholders something in the upper-$30s for each of their stubs. But when Wesley Jessen surprised Bausch & Lomb later that month by inking an agreement to fill out its own non-tinted offerings by buying Ocular Sciences (Nasdaq: OCLR), Bausch & Lomb launched its $34 per share tender. (Neither that, nor $35.55, seem quite "upper-$30s" to me.)
Since Wesley Jessen has agreed to listen to Bausch & Lomb's overtures, the term "hostile tender" doesn't quite apply -- but the tenor of the discussions certainly doesn't seem to be one befitting a nearly married couple. Wesley Jessen, in press releases, suggested potential buyout prices in the $40 range and hasn't disavowed Ocular Sciences -- the deal got antitrust clearance from the FTC last week. It's also apparently spoken with another, third, party.
And so some investors decided to bid up Wesley Jessen shares to $38 as of last night. Presumably they were doing so not based on their evaluation of what a combined Ocular Sciences/Wesley Jessen might be worth, but what they thought they'd be able to get from Bausch & Lomb for their shares.
As of today, they're back to square one. At last check the shares were down more than 10% and trading below even the now-updated $34 bid. The thinking would seem to be that Wesley Jessen will play the hardline and reject Bausch & Lomb's "best and final" offer, leaving them back where they began. (Wesley Jessen shares hadn't touched $34 since Bausch & Lomb first made its intentions known.)
It's quite likely there'll be more playing for investors to do in this case. Will Wesley Jessen's supposed white knight come in with a deal superior to Bausch & Lomb's? Is Bausch & Lomb serious about its offer being final? How much more might it pay? What would the future of a combined Wesley Jessen/Ocular Sciences really be? How many more Wesley Jessen holders will tender their shares in response to the new offer?
Some may choose to try to play this scenario for arbitrage points: Today's sizable move in Wesley Jessen showed there is certainly money to be made. As noted in our last article on this matter, though, Fools should remember that this is a trading strategy requiring high levels of risk tolerance, attention to minute detail, and guesswork. Potential investors should carefully determine their willingness to take a chance at profiting from it.
Related Links:
RSS Headlines
Fool UK
