Jan. 12 (Bloomberg) -- Abbott Laboratories will pay $1.36 billion for Advanced Medical Optics, a maker of eye-surgery equipment, advancing the drugmaker into another market that may benefit from the aging population.

Abbott will buy all of Advanced Medical Optics’ 62 million shares for $22 each, more than twice the closing price of $8.85 on Jan. 9, the companies said today in a statement. Abbott, which will also assume Advanced Medical Optics’ debt, valued the transaction at about $2.8 billion.

Advanced Medical Optics, the world’s largest maker of Lasik vision-correction equipment and the second-biggest maker of devices for cataract surgery, lost 74 percent of its value in the two years before today, after a recall of its contact-lens cleaner and a drop in Lasik procedures. Abbott said the deal gives the drugmaker entree in the $22 billion eye-care market and adds to a medical-device business that includes heart stents, diagnostic tests and insulin pumps for diabetics.

“These are unusual times and we know what the value of this company is,” Abbott Chief Financial Officer Thomas Freyman said during a conference call. “This is a fair price and we are going to get a good return on this transaction.”

As many as 60 percent of people over age 60 will develop cataracts, the leading cause of blindness in that age group, according to Abbott. The company said it expects Advanced Medical Optics’ sales to grow as the world population of people over age 60 increases by 30 percent, to 1 billion, within a decade.

Freyman said Abbott has been shifting into areas with growth potential, avoiding dependence on any one product. In 2006, Abbott paid $4.1 billion for Guidant Corp.’s heart stent business, and $3.7 billion for Kos Pharmaceuticals Inc. to gain access to cholesterol drugs. Abbott had $3.77 billion in cash and short-term securities as of Sept. 30.

Regulatory Scrutiny

Advanced Medical Optics, of Santa Ana, California, has been under U.S. regulatory scrutiny since its 2007 recall of contact- lens cleaning solutions linked to potentially blinding eye infections. Lasik procedures dropped by 35 percent last year because of the recession. Demand for laser eye surgery, performed to eliminate the need for eyeglasses or contact lenses, may not rebound until 2010, Abbott said.

Abbott, of Abbott Park, Illinois, declined $1.11, or 2.2 percent, to $50.06 at 4 p.m. in New York Stock Exchange composite trading. Advanced Medical Optics leaped $12.65 to $21.50.

Abbott may have agreed to pay too much, given that it was the sole bidder, said Joanne K. Wuensch, a BMO Capital Markets Corp. analyst in New York, in a note to clients today. The deal “exemplifies the new M&A paradigm -- larger companies with cash shopping for beaten-up franchises which could be leveraged in an economic recovery,” Wuensch said.

Earnings Forecast

Abbott said in a separate statement that it expects to earn $3.65 to $3.70 a share in 2009. That would about meet the $3.66 a share average estimate of 14 analysts surveyed by Bloomberg.

The deal, expected to close in the first quarter, will add to earnings beginning in 2010, the drugmaker said.

Advanced Medical Optics reported $1.55 billion of debt as of Sept. 30, according to Bloomberg data. The company also listed $35 million in cash.

The market for contact-lens cleaners is valued at $1.7 billion a year, with 35 million Americans wearing contacts.

Morgan Stanley and Jones Day advised Abbott on the deal. Advanced Medical Optics was represented by Goldman Sachs Group Inc., UBS AG and Skadden, Arps, Slate, Meagher & Flom. The deal includes a breakup fee whose value wasn’t made public, Abbott said.

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Last Updated: January 12, 2009 16:14 EST