July 11 (Bloomberg) -- Advanced Medical Optics Inc.'s second-largest stockholder objected to the company's proposed takeover of Bausch & Lomb Inc., the contact-lens maker, saying the purchase would reduce shareholder returns.

The investor, ValueAct Capital, of San Francisco, intends to vote against the $4.3 billion plan, according to a document filed today with the U.S. Securities and Exchange Commission. Officials of ValueAct, which owns 14.7 percent of Advanced Medical, said the firm doubts management can successfully integrate the two companies.

Advanced Medical is in a bidding war with private-equity firm Warburg Pincus LLC for the Bausch & Lomb business. Warburg offered a lower, all-cash $3.68 billion in a deal that already has been cleared by U.S. regulators. ValueAct said Advanced Medical should cede the competition and focus on the recall of a contact-lens solution and its earlier purchases.

``Management should take the lower-risk path of fixing the solutions business and integrating prior acquisitions while letting Warburg handle the heavy lifting of the B&L turnaround,'' said Jeffrey Ubben and G. Mason Morfit, managing partner and partner of ValueAct, in the letter. ``We want you to prove to your shareholders that you deserve to do a deal this big, by first executing on the current challenges.''

Bausch & Lomb's shares fell $1.56, or 2.2 percent, to $68.79 at 4:16 p.m. in New York Stock Exchange composite trading. The stock of the Rochester, New York, company has gained 32 percent this year. The Warburg Pincus offer is for $65 a share, and the Advanced Medical bid, $75.

The shares of Advanced Medical, based in Santa Ana, California, rose 46 cents, or 1.34 percent, to $34.75. The stock has fallen 1.28 percent this year.

Bausch & Lomb Plant

Separately, Bausch & Lomb said today that the Greenville, South Carolina, factory that makes the ReNu MultiPlus contact- lens solution passed a U.S. inspection. The Food and Drug Administration found deficiencies there last year after the company's ReNu With MoistureLoc solution was linked to a potentially blinding fungus.

Bausch & Lomb production of ReNu With MoistureLoc and recalled more than 1 million bottles of another contact lens solution in March after excess levels of iron were discovered. The problems at the plant ``weren't related to fusarium,'' McDougall said.

Ubben didn't immediately respond to a telephone request for comment left at his office number.

Financing Commitment

Bausch & Lomb's ``special committee and board are aware of the ValueAct letter and intend to review it as part of their evaluation'' of the Advanced Medical proposal, said Michael L. McDougall, a spokesman for Bausch & Lomb, in a telephone interview today.

Warburg Pincus received a commitment for $3.27 billion of debt financing for the Bausch & Lomb transaction from banks led by Bank of America Corp., according to a regulatory filing yesterday.

Advanced Medical officials said in a reply to ValueAct that they were surprised by the opposition because ValueAct earlier supported the deal and showed an interest in investing $700 million in acquiring Bausch & Lomb. Advanced Medical defended the proposal as ``a unique and compelling'' opportunity to expand the company.

`Every Confidence'

``We have every confidence that we have the experience and bandwidth to successfully complete the transaction and integrate the two businesses,'' wrote Chief Executive Officer James V. Mazzo in a letter file separately with the SEC.

The $4.3 billion bid from Advanced Medical consists of cash and stock and may require divestitures to satisfy antitrust regulations.

Advanced Medical pulled its Complete MoisturePlus multipurpose eye solution from store shelves in May after U.S. health inspectors linked the product to infections with a waterborne organism that can lead to blindness.

The recalled cleaner for contact lenses accounted for 11 percent of the company's 2006 sales.

The largest investor in Advanced Medical is Fidelity Investments, with 14.9 percent of the stock as of March 7, according to Bloomberg data.

``Fidelity doesn't discuss specific stocks,'' spokeswoman Deborah Ponti said in response to a request for comment on Advanced Medical's bid.

To contact the reporter on this story: Michelle Fay Cortez in Minneapolis at mcortez@bloomberg.net.

Last Updated: July 11, 2007 16:32 EDT