Eyecare company Bausch + Lomb explores sale to end messy spin-off

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Bausch + Lomb, one of the world’s largest contact lens suppliers, is exploring a sale as a way out of a messy separation from its heavily indebted parent company, which has been opposed by lenders including Apollo Global Management.

The eye care business — which was carved out of Bausch Health, formerly known as Valeant, in 2020 — is working with advisers from Goldman Sachs to test interest from potential buyers, said people familiar with the matter. Bausch + Lomb was likely to draw interest from private equity groups, they added.

A target sale price could not be ascertained but Bausch + Lomb’s enterprise value including debt stood at just over $10bn, based on its share price at market close on Friday.

Any deal to sell the business was likely to come at a sizeable premium to the current valuation as Bausch + Lomb’s business has been performing well, the people said, adding that the sale process may not result in a transaction. Bausch + Lomb’s chief executive Brent Saunders is a well-known dealmaker who oversaw Allergan’s $63bn sale to AbbVie.

Bausch Health retained an 88 per cent shareholding in the eye care subsidiary after listing the group in 2022. But it planned to offload the remainder of shares by striking a deal with its investors to exchange Bausch Health stock for Bausch + Lomb stock.

However, the process became unstuck as doubts arose over whether the parent company would still be solvent after separating from its revenue-generating subsidiary because of Bausch Health’s huge debt pile. Bausch Health would have to pass a solvency test in order for any spin-off to be approved.

After a string of acquisitions, Bausch Health has accumulated a $21bn debt pile, almost $10bn of which is coming due by the end of 2027. A group of Bausch Health creditors, including Apollo Global Management, Elliott Management and GoldenTree Asset Management, had raised concerns about a spin-off of the eye care business because of the impact it would have on the parent company’s balance sheet.

Bausch Health’s top shareholders, funds run by Carl Icahn and John Paulson’s fund Paulson & Co, had supported the completion of a spin-off as it would give them a large shareholding in the more profitable eye care business.

A sale to private equity could potentially find a route out of the impasse, allowing Bausch Health to settle some of its debts with the proceeds of the sale and satisfying Icahn and Paulson, both of whom have board representation at the parent company as well as its subsidiary.

Bausch + Lomb said: “We don’t comment on rumours and speculation.” Goldman Sachs also declined to comment.

Bausch + Lomb is projected to generate $4.7bn in revenues and nearly $860mn in adjusted earnings before interest, taxation, depreciation and amortisation this year. Nearly three-fifths of Bausch + Lomb’s revenues come from its contact lens and eye drug business. It also sells surgical equipment used by ophthalmologists.

Before Bausch + Lomb was listed in 2022, it received interest from private equity groups, but decided to proceed with a listing of the unit believing it would unlock more value. But the stock’s performance has underwhelmed: the enterprise value of the business stood at $10bn at market close on Friday, not much more than the $8.7bn Bausch Health paid for the business in 2013.

On top of its large debt pile, Bausch Health faces uncertainty as its lead drug — Xifaxan, a gastrointestinal medication used to treat conditions such as irritable bowel syndrome — is set to come off patent by 2029. Bausch Health’s market value has dropped to just $2.2bn as fears over its solvency grow and the company has become embroiled in legal battles over Xifaxan’s patent.