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Blackstone has cooled on taking part in a joint takeover bid for eyecare company Bausch + Lomb, jeopardising one of the biggest leveraged buyouts in healthcare this year, according to people familiar with talks.
The private equity group in October teamed up with investor TPG to explore a bid for Bausch + Lomb. But Blackstone had subsequently balked at the frothy price expectations of the seller, the people said.
An auction process for Bausch + Lomb, which sells contacts lenses, dry eye drugs and surgical ophthalmology equipment, began earlier this year as its heavily indebted parent company Bausch Health looked to pay down debt.
Two people close to the talks said Blackstone would probably drop out of the consortium, reducing the odds of a deal. Talks were ongoing and a deal could still be clinched if Bausch + Lomb was willing to accept a lower price or if TPG found another private equity group to act as partner on the deal, the people added.
Negotiations between Bausch + Lomb and the consortium were held as recently as the end of last week. Shares in Bausch + Lomb stood at just over $20 at Tuesday’s close, giving it an enterprise value including debt of more than $11bn. Bausch + Lomb’s share price had jumped 30 per cent since the Financial Times first reported in September that it had hired Goldman Sachs to run a sales process. However, the stock fell about 10 per cent in after-hours trading following the FT’s report on Blackstone’s reluctance to join the bid.
Bausch + Lomb’s board — which includes hedge fund titan John Paulson and a representative of activist investor Carl Icahn, who are both major Bausch Health shareholders — had been hoping for an offer at a sizeable premium to $20 a share to get a deal over the line, but the consortium of TPG and Blackstone pushed back at offering such a high price.
The company is run by chief executive Brent Saunders, a well-known dealmaker who pushed the $63bn sale of botox maker Allergan to pharma group AbbVie, and is a close ally of Icahn.
TPG already owns an eyecare business — BVI Medical — and questions arose in due diligence about how it could be successfully combined with Bausch + Lomb.
Some 88 per cent of Bausch + Lomb is owned by Bausch Health, which has been struggling with a $21bn debt pile and a languishing share price left over from when it was previously known as Valeant. Valeant came under pressure from investors for accounting irregularities and a costly acquisition spree.
Bausch Health has been trying to spin off Bausch + Lomb as a listed company but the process faltered as Bausch Health creditors, including Apollo Global Management, Elliott Management and GoldenTree Asset Management, fretted over the impact it would have on the parent company’s balance sheet.
Blackstone, TPG and Bausch + Lomb declined to comment.
Bausch + Lomb has posted four quarters of about 20 per cent year-on-year sales growth, and its management is confident it can continue to thrive even if a deal falls apart, two people said. The eyecare company is projected by analysts to generate $872mn in earnings before interest, taxes, depreciation and amortisation this year on $4.7bn in revenues.
Bausch Health, meanwhile, is facing concerns about $10bn in debt that is set to come due before the end of 2027 — with the highest priority being a $2.4bn fixed-rate loan due next year.
