Bausch Reportedly Eyes A Sale; Could J&J Or AbbVie Buy It?

Bausch + Lomb (BLCO) stock surged Monday — briefly breaking out — on a report that the company is working with advisors to explore a potential sale.

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The company is best known for its eye care products, including contact lenses and ophthalmic surgical devices. Its parent company, Bausch Health Cos. (BHC), is facing patent litigation surrounding Xifaxan, a treatment for a brain disorder that can occur in people with irritable bowel syndrome.

“We aren’t surprised to hear Bausch + Lomb is exploring a potential sale and we believe private equity is the most likely buyer,” Needham analyst David Saxon said in a report.

In morning trading on today’s stock market, Bausch + Lomb shares jumped more than 12% to 17.54. The stock briefly topped a buy point at 17.85 out of a flat base, according to MarketSurge.

Bausch + Lomb Could Face Antitrust Issues

Private equity makes the most sense because other companies would likely face antitrust challenges, Needham’s Saxon said.

Medical device peers Alcon, Cooper Cos. and Johnson & Johnson own 25% to 40% of the market for contact lenses vs. 10% for Bausch + Lomb.

In pharmaceuticals, AbbVie would encounter antitrust concerns given its Restasis has 45% of the dry-eye market. Bausch owns about 40% with its drugs Miebro and Xiidra.

“Given these points, a sale to a strategic would likely require splitting up Bausch + Lomb, so private equity would make for a cleaner transaction,” he said.

Representatives of Bausch + Lomb declined to comment in an email to Investor’s Business Daily.

Is It Enough For Bausch Health?

The company is worth about $13.4 billion, Saxon estimates. That translates to about $26 per share.

But that might not be enough for Bausch’s parent company. Bausch Health owns 88% of the former and it has $21.6 billion in debt. If it used all the after-tax proceeds from selling Bausch + Lomb, Bausch Health would still have $12.3 billion in remaining debt.

“In this scenario, it is uncertain that a Bausch + Lomb sale would alleviate investors’ concerns around Bausch Health Companies’ solvency and could be challenged by Bausch Health Companies creditors,” he said.

He kept his hold rating on Bausch + Lomb stock.

Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.

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