Eye-care company Bausch & Lomb said Wednesday it has agreed to be acquired by private equity firm Warburg Pincus for $65/share, a 5.7% premium over Tuesday's close, and about a 26% premium to its average 30-day share price prior to media rumors of a possible buyout. Including the $830 million in debt it will assume, the total price tag amounts to about $4.5 billion. Bausch & Lomb shares are trading up 10.4% at $67.89 -- indicating investors apparently anticipate a bidding war. Robert W. Baird analyst Jeffrey D. Johnson didn't see much room for shares to move up: "This looks like a pretty fair deal... If I were a shareholder here, I would not be expecting much upside from the $67 [price]." The price tag is 29.5x 2007e EPS of $2.13 and 9.5x 2007e Ebitda [earnings before interest, taxes, depreciation and amortization]. Johnson said going private would allow the company to address its problems (product recalls and accounting issues) out of the limelight. The company last year underwent a massive recall of its ReNu with MoistureLoc contact lens solution after it was associated with a rare fungal eye infection that can cause blindness; this year it made a limited recall of its ReNu MultiPlus solution. CEO Ronald Zarrella: "As a private company, Bausch & Lomb will have greater flexibility to focus on our long-term strategic direction." The deal allows Bausch & Lomb to solicit superior offers for the next 50 days, and carries a $40 million break-up fee.
Sources: Press release (.pdf), Reuters, MarketWatch
Commentary: Bausch & Lomb Could Be Heading Toward a Buyout, But Based On What? • Fisher's Buyout Candidates • Bausch & Lomb: Overblown Concerns, Cheap Stock
Stocks/ETFs to watch: Bausch & Lomb Inc. (BOL). Competitors: Alcon Inc. (ACL), Advanced Medical Optics Inc. (EYE), Cooper Companies Inc. (COO)
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