The healthcare stock, known for its significant debt, experienced an increase in its share price amidst speculation of a potential sale.
Shares of Bausch + Lomb (BLCO) saw a 15.7% increase as of 3:07 p.m. ET today. The surge in stock price is attributed to reports that the company is contemplating selling itself. Bausch + Lomb is the eye-care subsidiary of Bausch Health Companies, which was previously named Valeant Pharmaceuticals.
A decade ago, Valeant encountered financial difficulties after acquiring several pharmaceutical companies through debt, reducing research budgets, and raising prices. The resulting debt burden led to a dramatic decline in the company’s stock value, prompting management changes and a rebranding to Bausch Health in 2018. In 2022, the company conducted an initial public offering (IPO) for Bausch + Lomb, raising $630 million while retaining an 88% stake in the subsidiary.
According to the Financial Times, Bausch + Lomb has been exploring the possibility of a complete sale. Initially, Bausch Health intended to execute a stock-for-stock exchange to spin off the division. However, the company’s lenders reportedly resisted this move. Given B+L’s more consistent performance compared to the parent company, lenders are favoring either retaining the division or selling it outright for cash.
Bausch Health Companies currently carries about $21 billion in debt, with B+L’s portion being $4.6 billion. Bausch + Lomb is expected to generate $4.7 billion in revenue and $860 million in EBITDA (earnings before interest, taxes, depreciation, and amortization) this year. In a spinoff scenario, the less consistent remaining Bausch Health entities would continue to bear a significant debt load.
Bausch Health Companies’ stock also rose by 10.7% today, indicating investor confidence that B+L could fetch a considerable premium above its previous trading price in the event of a sale. Such a transaction could significantly reduce Bausch Health’s overall debt.
Billy Duberstein and/or his clients hold no positions in any of the stocks mentioned. The Motley Fool recommends Bausch Health Companies and adheres to a disclosure policy.
