Bausch+Lomb (BLCO), a contact lens supplier, is exploring a sale to address concerns raised by its lenders like Apollo Global Management (APO) regarding its separation from its parent company Bausch Health (BHC), according to an exclusive Financial Times report. Shares of BLCO surged in trading following the news of the potential sale.
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Bausch + Lomb Is Testing Interest from Potential Buyers
The eye care unit is working with Goldman Sachs to gauge potential buyer interest. The report stated that private equity groups are likely to be interested in Bausch + Lomb. While no target sale price could be ascertained for the potential sale, the report stated that the company’s enterprise value, including debt, is over $10 billion.
As a result, a potential sale could come at a premium due to the business’s strong performance.
Why Is Bausch+Lomb Exploring a Potential Sale?
Currently, Bausch+Lomb’s parent company, Bausch Health has an 88% stake in the company and is exploring a spin-off of the contact lens supplier. However, there is growing uncertainty about the spin-off after creditors like Apollo Global Management raised some concerns about the parent company.
This is because there are doubts about whether Bausch Health would still be profitable after the separation of its revenue-generating subsidiary, Bausch+Lomb. With Bausch Health burdened by a massive debt of $21 billion, questions have risen about whether it could remain financially stable without the revenue generated by Bausch + Lomb. As a result, for the spin-off to take place, Bausch Health must pass a solvency test.
Furthermore, the patent for Bausch Health’s lead drug, Xifaxan, is set to expire by 2029 leading to more uncertainty about the company’s revenues. Xifaxan is used to treat patients with irritable bowel syndrome (IBS).
Is BLCO a Good Buy?
Analysts remain cautiously optimistic about BLCO stock, with a Moderate Buy consensus rating based on seven Buys and six Holds. Year-to-date, BLCO has increased by more than 4%, and the average BLCO price target of $18.61 implies an upside potential of 4.7% from current levels.
