- Bausch + Lomb is exploring a potential sale that would separate the eye care company from parent firm Bausch Health, the Financial Times reported on Saturday, citing unnamed sources.
- A private equity firm could be a likely buyer, J.P. Morgan and Needham analysts wrote in research notes. “There are only a few strategics that would make sense, in our view, and all would likely run into anti-trust challenges,” Needham analyst David Saxon wrote in a Monday note to clients.
- Bausch + Lomb received interest from private equity firms before it went public in 2022, the Financial Times reported. A company spokesperson wrote in an email to MedTech Dive, “We don’t comment on speculation or rumor.”
Bausch + Lomb went public in 2022, and Bausch Health sold 10% of its stake in the company. Bausch Health currently has an 88% stake, Saxon wrote.
The parent company plans to spin out the remaining shares eventually, but those plans have been delayed by investor lawsuits, J.P. Morgan analyst Robbie Marcus wrote in a Sunday note. The lawsuits claim that Bausch Health, with $21.6 billion in debt, would be overly leveraged without the cash generated by the eye care business. About $10 billion of debt is due by the end of 2027, according to the Financial Times article.
Bausch + Lomb is assessing interest from potential buyers as a way around the roadblock, the FT wrote. The company had a market cap of $6.27 billion on Monday.
A private equity sale seems most likely because a deal with Alcon, Johnson & Johnson or Cooper Companies could face antitrust scrutiny due to their shares of the contact lens market, Needham’s Saxon wrote. A purchase by a pharmaceutical company, such as AbbVie, could also prove challenging with its share of the dry eye market.
Bausch + Lomb’s global brand recognition, particularly in the contact lens market, could be a draw for a potential buyer, Marcus wrote. However, he cautioned that cutting spending and flipping the company for a profit is an unlikely scenario. Bausch + Lomb’s contact lens and surgical portfolios will require heavy investment to become competitive after years of underinvestment by its parent company, he wrote.
There’s also the question of whether a sale will be enough for investors who are worried about Bausch Health’s solvency. If Bausch + Lomb sold for $26 per share, and its parent company used all of the proceeds to repay debt, it would still have $12.3 billion in remaining debt, Saxon wrote. In that scenario, the sale could be challenged by Bausch Health creditors, he added.
Shares of Bausch + Lomb opened at $18.15 on Monday. The company reported $1.22 billion in revenue and a $151 million net loss attributable to the company in the quarter ending June 30, as well as $4.6 billion in long-term debt.
https://www.medtechdive.com/news/bausch-lomb-considers-sale/727111/
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