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Making Eyes at Cooper

For investors, the view at contact-lens maker Cooper Cos. (COO) is getting clearer: Hovering near their 52-week high of 51, Cooper's shares are primed to hit even higher levels. So says investment pro Dennison Veru of Palisades Capital Management, who thinks Cooper might well be swallowed by one of its larger rivals.

The stock's strong rise--up from 35 in mid-February--reflects several favorable developments: its recent victory in a patent-law suit brought by Ciba-Geigy's Wesley Jessen unit, the launch in June of its "Expression" lenses--the lenses come in various colors and tints--and the possibility that Cooper may be acquired by Johnson & Johnson, the big noise in contact lenses. Disposable color contact lenses make up 60% of the entire cosmetic lens market--and are growing rapidly. "Cooper is positioned well today in the fastest growing segment of the contact lens market--specialty contact lenses," says Joanne Wuensch of ABN Amro. Cosmetic lenses are dominated by Ciba-Geigy. Major contact-lens makers Bausch & Lomb and J&J aren't yet players in cosmetic lenses. J&J may be working on a cosmetic lens, say some analysts.

But Veru believes J&J will make a move on Cooper instead. He figures Cooper is worth 65 to 70 a share to a strategic buyer. Its CooperVision unit, which brought in 77% of sales in 2000, makes high-margin lenses. Cooper's other unit, CooperSurgical, with 23% of revenues, makes health-care products, including gynecological instruments. J&J is No. 1 in these two markets, notes Veru, and it could expand both operations via Cooper. "I doubt that Cooper could compete well in the markets currently dominated by J&J and Ciba-Geigy," argues Veru. He figures it will earn $2.40 a share in 2001 and $2.80 in 2002. Cooper declined comment on the buyout speculation. By Gene G. Marcial

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