Abbott buying Advanced Medical for $2.8 billion

Libertyville Township-based Abbott Laboratories aims to expand into vision care products, especially with cataracts and Lasik surgery, by acquiring a California company for about $2.8 billion in stock and debt.

Santa Ana, Calif.-based Advanced Medical Optics, which makes lens and eye care products, agreed Monday to be acquired for $22 per share, about double its share price. The premium was for future growth potential since aging Boomers could require cataract surgery and other eye care, said Abbott spokeswoman Meslissa Brotz.

"It's a fair price that depends on its growth rate and is 2 1/2 times its sales," said Brotz. "That's comparable to other medical device company transactions."

The company had a share price in the double digits for years, but its value has fallen in recent months due to the economic downturn and internal problems. This included regulatory scrutiny after its contact lens solutions were recalled and linked to potentially blinding eye infections.

It's still a good deal for Abbott, said Damien Conover, analyst with Chicago-based Morningstar Inc.

"This company didn't have all the necessary resources to improve its quality control or develop new products," said Conover. "Abbott has deep pockets and could help this business a lot."

Conover believes Advanced Medical Optics could have sold for $28 per share, so Abbott got a good price.

"This is a nice opportunistic time to expand its business line," Conover said about Abbott. "This business could grow further."

Brotz said Advanced Medical Optics is expected to maintain its current operations and executives and may change its name to include Abbott's at some future point. Also its 3,700 workers likely will join Abbott's 68,000, although some redundant positions could be eliminated, Brotz said.

"We've been looking at this market for quiet some time and are happy with our choice," she said.