Valeant close to buying Bausch & Lomb
Canadian pharmaceutical giant working on $9B deal, source says
MONTREAL — Valeant Pharmaceuticals International Inc., Canada’s largest drug maker, is close to acquiring Bausch & Lomb Holdings Inc., the eye-care company owned by Warburg Pincus LLC, for about $9 billion, according to a person familiar with the negotiations.
Warburg, which bought Bausch & Lomb in a 2007 leveraged buyout, filed for an initial public offering in March after an earlier effort to sell itself for at least $10 billion stalled, people familiar with the matter said at the time. The private-equity firm now is near a deal to sell the eyecare company to Valeant, said a person who asked not to be identified because the conversations are private.
In Toronto, Valeant stock closed at $87.02 Friday, up 13.2 per cent or $10.18. The shares have risen 60 per cent in the 12 months through Thursday.
Valeant is actively seeking acquisitions of companies with solid cash flows in high- growth areas, chief executive Mike Pearson said earlier this month. The Bausch & Lomb deal would be the largest of 15 acquisitions for Montrealbased Valeant since it was created in a 2010 merger of its U.S. predecessor and Canada’s Biovail Corp.
“They have got to continue to feed the machine that is their stock price and right now investors are craving these acquisitions,” said Corey Davis, an analyst at Jefferies LLC in New York. “They don’t need to do this right now, but given that this is their core competency and it feels like an Oklahoma land grab in specialty pharma, they should strike while the iron is hot.”
Warburg invested about $1.7 billion of equity in the 2007 buyout, a person with knowledge of the matter said. A sale at $9 billion, including debt, would give the private-equity firm a total return of about $5.3 billion, more than three times its outlay. That includes $758 million it reaped from a dividend in March.
Adam Grossberg, a spokesman for Bausch & Lomb, said it is focused on building the best global eye-health company and declined to comment further. Laurie Little, a spokeswoman for Montreal-based Valeant, and Jeffrey Smith, a Warburg Pincus spokesman, declined to comment.
At $9 billion including debt, Rochester, N.Y.-based Bausch & Lomb would be valued at about 21 times earnings before interest, taxes, depreciation and amortization of $429.5 million in the year through December, according to data compiled by Bloomberg. Bausch & Lomb reported adjusted Ebitda of $643.1 million for the period, excluding costs from stock-based compensation and recent acquisitions.
The buyout values the company at 14 times those adjusted earnings, data compiled by Bloomberg show.
Valeant last month was said to be in talks to merge with Parsippany, N.J.-based Actavis Inc., the largest U.S. generic-drug maker, according to people familiar with the matter. Actavis on May 20 said it agreed to buy Warner Chilcott PLC for about $5 billion in a stock deal.
Valeant’s largest purchase to date was a $2.4-billion deal for Medicis, a skin care company, after it failed in 2011 to buy drugmaker Cephalon Inc. with a bid of about $5.7 billion.