NEW YORK (AP) _ Cosmetic surgery products company Mentor Corp. said Monday that it would sweeten a $2.2 billion bid to acquire Medicis Pharmaceutical Corp. by offering substantially more cash than stock after being rebuffed.
Shares of Medicis surged $5.03, or 18 percent, to $32.78, and Mentor shares fell $2.32, or 4.1 percent, to $53.82 in morning trading on the New York Stock Exchange.
Medicis' board quickly rejected Mentor's offer on Sunday evening, stating it is committed to completing its proposed acquisition of Inamed Corp.
Last week, Medicis was upstaged by Botox maker Allergan Inc. to purchase Inamed. Medicis had offered in March to buy Inamed for about $2.8 billion in cash and stock. But last Tuesday, Allergan offered $3.2 billion for Inamed, an offer that Inamed's board instructed management to consider.
Mentor, in a letter to Medicis on Friday, told the company that its offer is a superior proposal to the Inamed deal. Mentor offered Medicis shareholders 0.62 shares of Mentor common stock per Medicis share, a 25 percent premium, the company said. Medicis would own 44 percent of the combined company. Mentor said its board has already backed the transaction.
In a conference call, Mentor Chief Executive Joshua Levine urged Medicis' board to reconsider the proposal and said it may have a significant portion of the offer in cash to bring Medicis to the table. Goldman Sachs and Citigroup have assured the company that financing is available, he said.
Mentor said it expects the transaction to immediately boost cash earnings. Analysts surveyed by Thomson Financial expect earnings per share of $1.59 in 2006 and $1.98 in 2007.
In the conference call, Levine said he would expect the transaction to raise earnings per share in the low double digits. However, CIBC analyst John Calcagnini repeatedly called that estimate too high.
Lazard analyst Alex Arrow prodded Levine on Mentor's determination to acquire Medicis and asked if the company would consider a hostile bid if resistance continues.
``We're going to wait for the dust to settle,'' Levine said on the call. ``We know what our options are.''
The combined company would have revenue of nearly $900 million for the year ended Sept. 30, and would offer products for breast augmentation, facial aesthetics, body contouring and dermatology. Mentor said the transaction would not have the same antitrust risks as the proposed Medicis-Inamed deal.
Levine added that Mentor is ready to file a confidentiality agreement with Medicis and enter a definitive merger agreement. Were that to proceed, the CEO expects shareholder meetings to be held in the first quarter of 2006.
Separately, Allergan said Monday that it entered into a confidentiality agreement with Inamed to begin exchanging nonpublic information. Allergan has begun its exchange offer for Inamed's stock, which it set to expire Dec. 20.
Both Mentor and Inamed are awaiting a decision from the Food and Drug Administration on the marketing of silicone-gel breast implants, which have been off the U.S. market for the past 13 years because of safety concerns.