According to a press release from Monday, January 12, 2009 an investigation on behalf of investors of Advanced Medical Optics, Inc (NYSE: EYE) concerning potential breaches of fiduciary duty by the board of directors of Advanced Medical Optics, Inc (NYSE: EYE) in connection with the proposed acquisition by global health care and medical research giant Abbott Laboratories (NYSE: ABT) was announced. Abbott Laboratories offers Advanced Medical Optics, Inc (NYSE: EYE) shareholder $22 a share. Is that a fair price?

Abbott Laboratories (NYSE: ABT) announced that it has agreed to acquire Advanced Medical Optics Inc. (NYSE: EYE) for $1.36 billion. Including debt, the deal is worth about $2.8 billion. Under the terms of the proposed acquisition Abbott Laboratories (NYSE: ABT) will commence a tender offer by Jan. 26, 2009, to purchase all outstanding shares of Advanced Medical Optics Inc. ( NYSE: EYE) at $22 a share.

The stock of Advanced Medical Optics Inc. ( NYSE: EYE) yesterday has hit a low of $21.63 and a high of $21.77. EYE was traded on Monday at $21.70, up $12.85 (145.2%). Over the last 52 weeks the stock has ranged from a low of $2.88 to a high of $24.90. EYE shares are rising today after Abbott Laboratories said it will buy the company for $1.36 billion, or $22 per share, more than double the stock's Friday closing price. Thus offered price seems like a big premium (150%) to Friday's closing price of $8.85 of Advanced Medical Optics Inc. ( NYSE: EYE) shares, but CNNMoney.com says that Abbott Laboratories (NYSE: ABT) acquires Advanced Medical Optics Inc. ( NYSE: EYE) at a discount, because shares of Advanced Medical crumbled nearly 90% in September and October.

Advanced Medical, based in Santa Ana, Calif., is the top equipment maker for laser-vision correction and has a big business for treating cataracts, which is an age-related issue and a market fueled by demographics. Reportedly 60% of people over 60 have cataracts and that the number of people with the eye problem is expected to grow nearly 50% in the next decade, and the cataract business accounts for half of the revenue at Advanced Medical Optics, and 70% of its cataract sales are overseas. In 2007, Advanced Medical Optics itself made a $4.2billion unsolicited takeover bid for Bausch & Lomb, another top eye care company; but then lowered the bid after one of its largest investors decried the deal. Less than a year after the Swiss drugmaker Novartis reportedly said it would buy up to a 77 per cent stake in Alcon, the eye care market leader, from Nestl in a two-step transaction worth as much as $39billion.

Forbes.com says though the premium might appear exorbitant, Advanced Medical is the world's largest player in surgical devices for LASIK laser vision corrective procedures and it ranks No. 2 in the cataract surgical device market and No. 3 in contact lens care products. Forbes.com concludes that for all the premium's excessive appearance, Abbott is purchasing the company at a discount of about 12.0% from its 52-week high of $24.90.

Damien Conover of Morningstar Inc. contended that the acquisition is actually cheap and said Morningstar's fair value of AMO stock is $28 a share. 'I think AMOs price was too low,' he said.

Therefore on Monday, Jan. 12, 2009, an investigation on behalf of investors of Advanced Medical Optics, concerning potential breaches of fiduciary duty by the board of directors of Advanced Medical Optics, Inc in connection with the proposed acquisition by Abbott Laboratories was announced.

According to the investigation the transaction appears to be unfair and undervalues Advanced Medical Optics, Inc (NYSE: EYE). Advanced Medical Optics, Inc (NYSE: EYE) 's shares traded as high as $42.55 per share on May 18, 2007, $32.01 per share in October 5, 2007 and $24.90 in June 2008.

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