Obagi shares were up 9 percent at $25.03 in early trading as investors geared up for a takeover fight over a company that makes specialized skin care products to fight signs of aging, sun damage and acne.

Obagi's products are sold only through prescription and are considered to be more potent than commercially available over-the-counter cosmetics, enabling the manufacturer to command a premium pricing.

Specialized cosmetic treatments for aesthetic reasons had taken a hit during the recession, but as the economy stabilizes, physicians offering these services are seeing patients return.

Obagi and Canada's Valeant agreed to a deal last month in which Valeant offered $19.75 per share. However, Merz Pharma topped that with an offer of $22 per share on Tuesday.

Valeant said its latest offer, which values Obagi at about $418 million, has been approved by Obagi's board.

(Reporting by Esha Dey in Bangalore; Editing by Maju Samuel)