Bausch + Lomb dips on rumour of failing takeover talks

Shares in ophthalmology specialist Bausch + Lomb (B+L) have lost almost 10% of their value on a report that a joint takeover bid for the group is in trouble.

The Financial Times has said that investment group Blackstone – which formed a partnership with TPG to explore a possible acquisition of B+L earlier this year – is uncomfortable with the valuation that the eyecare company is putting on its business.

Citing people familiar with the matter, the FT reports that Blackstone is likely to drop out of the consortium, reducing the chances of a deal going through.

It was reported in October that the two private equity (PE) firms had partnered on a potential bid for B+L, which sells contact lenses as well as ophthalmic pharmaceuticals, intraocular lenses, and eye surgery products, and made revenues of $4.15 billion last year.

PE players are thought to be the most likely acquirers for the business, as other players in the ophthalmology market that might be interested – such as Alcon and Johnson & Johnson – could face antitrust resistance to a takeover.

Reports of Blackstone and TPG's interest sparked speculation that a deal could emerge at $25 per share, valuing B+L at between $13 and $14 billion. Shares in the NYSE-listed company were $18.72 in pre-market trading at the time of writing, valuing the company at around $7.25 billion.

There have been rumours for several months that Bausch Health (formerly Valeant Pharmaceuticals), B+L's debt-ridden parent company, which retains an 88% ownership stake in its business, is looking at strategic options, including a sale of the company. In July, it was forced to refute claims in the press that it was considering bankruptcy or insolvency proceedings.

Bausch Health ended the third quarter of this year with $21.5 billion of debt and, in October, ratings agency Fitch said that a separation from B+L – resulting in the loss of the eyecare unit's operating and financial stability – would create "significant risk to [Bausch Health's] credit profile."

Despite that, Bausch Health's main shareholders – who include funds run by billionaire investors Carl Icahn and John Paulson – are reported to have been pushing for a sale of B+L. They are also on the board of B+L and a sale would give them a larger stake in the more profitable ophthalmology business.

Around $10 billion of Bausch Health's debt is due towards the end of 2027, and a B+L sale would allow it to retire a considerable portion of it.

According to the FT report, Bausch Health's efforts to spin off B+L as a listed company have faced pushback from creditors worried about its impact on the parent company's balance sheet.