Private Equity Firms Explores Acquisition of Bausch + Lomb for Over $11.5 Billion
Private equity firms such as Blackstone and TPG Capital are showing interest in potentially acquiring Bausch + Lomb in a deal that is expected to exceed $11.5 billion. The eyecare company experienced a 19% surge in its share price following the announcement of the sale process, valuing its equity at $6.5 billion. The primary objective of this sale is to address Bausch Health's debt challenges, including $10 billion in maturities by 2027 and patent expiration concerns. Advised by Goldman Sachs, Bausch + Lomb aims to engage in exclusive talks by the end of October. Although the company was listed separately in 2022, it remains 88% owned by Bausch Health, and creditors opposed the spin-off due to fears of potential insolvency. Bausch + Lomb is projected to generate approximately $860 million in adjusted EBITDA from $4.7 billion in revenues this year, with a significant portion of its revenue derived from contact lenses and dry eye drugs. While private equity is considered the most probable buyer, uncertainties about Bausch Health's solvency persist.
Key Takeaways
- Private equity firms like Blackstone and TPG are eyeing Bausch + Lomb, with a potential sale price above $11.5 billion.
- Bausch + Lomb's share price jumped 19% on news of the sale process, valuing its equity at $6.5 billion.
- The sale aims to address Bausch Health's debt issues, with $10 billion in maturities by 2027.
- Bausch + Lomb is expected to generate $860 million in EBITDA from $4.7 billion in revenues this year.
- Private equity is seen as the most likely buyer, but concerns remain over Bausch Health's solvency.
Analysis
The potential acquisition of Bausch + Lomb by private equity firms like Blackstone and TPG Capital aims to alleviate Bausch Health's substantial debt burden, with $10 billion maturing by 2027. This move could stabilize Bausch Health's financial position in the short term but raises long-term solvency concerns. For Bausch + Lomb, the sale could provide strategic growth opportunities and access to capital, enhancing its market position in contact lenses and dry eye drugs. However, the deal's success hinges on resolving Bausch Health's financial woes, which could impact creditors and shareholders. The transaction's outcome will significantly influence the eyecare sector and private equity investment strategies.
Did You Know?
- Private Equity Firms: Private equity firms are investment entities that pool capital from various sources to acquire stakes in private or public companies. They typically aim to improve the acquired companies' performance through strategic changes, operational improvements, or financial restructuring, with the goal of selling the company at a higher value later. Examples in the news are Blackstone and TPG Capital, which are considering acquiring Bausch + Lomb.
- EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): EBITDA is a financial metric that measures a company's operating performance by excluding the impact of financial decisions and accounting practices. It provides a clearer picture of a company's core profitability and operational efficiency. In the context of Bausch + Lomb, the company is expected to generate nearly $860 million in adjusted EBITDA from $4.7 billion in revenues, indicating its strong operational performance despite its parent company's debt issues.
- Spin-off: A spin-off is a corporate action where a company "spins off" a part of its business into a separate, independent company. This can be done to unlock value, focus on core businesses, or address financial issues. Bausch + Lomb was listed separately in 2022 as a spin-off from Bausch Health, but Bausch Health still owns 88% of it. The spin-off was opposed by creditors who feared it could leave Bausch Health insolvent, highlighting the strategic and financial complexities involved in such corporate actions.