Shares of contact lens supplier Bausch + Lomb (BLCO) are surging in today’s trading amid news of a potential acquisition. According to an exclusive Financial Times report, private equity giants TPG (TPG) and Blackstone (BX) could submit a joint bid for Bausch + Lomb.
If this deal goes through, the report stated that it could be among the largest private equity buyouts of the year, as the company’s enterprise value, including debt, stood at $11.5 billion at the close of markets on Friday.
TPG and Blackstone Seen as Leading Contenders to Acquire BLCO
The Financial Times reported last month that Bausch + Lomb 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). TPG and Blackstone have been seen as leading contenders to acquire the firm right from the start.
In fact, before Bausch + Lomb’s public listing in 2022, both firms had expressed strong interest in taking the company private.
If the deal does happen, it will be beneficial for TPG since the private equity firm already has existing investments in the ophthalmology sector, as it owns BVI Medical, a company specializing in surgical eye care solutions.
How Much Will TPG and BX Be Willing to Pay for BLCO?
It is expected that the offer for BLCO could potentially value the company between $13 billion and $14 billion, or up to $25 per share. BLCO had a closing stock price of $19.47 on Friday, indicating that the private equity firms could be willing to pay a premium for the company if a deal materializes.
Why Is Bausch + Lomb Exploring a Potential Sale?
Currently, Bausch + Lomb’s parent company, Bausch Health, has an 88% stake in the firm and is exploring a spin-off of the contact lens supplier. However, creditors like Apollo Global Management have raised concerns about Bausch Health’s profitability after the separation.
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. 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 23%, and the average BLCO price target of $20.33 implies a downside risk of 3.5% from current levels if the company isn’t acquired.
