Warburg Pincus to buy Bausch & Lomb

The global private equity firm has offered $4.5 billion for the eye health specialist, which recently was forced to recall products.

Bausch & Lomb announced today that it has entered into a definitive merger agreement with global private equity group Warburg Pincus, ending market speculation that the company would be taken private. The offer values the eye health company at $4.5 billion (€3.33 billion) including approximately $830 million in debt.

 

Bausch & Lomb: the lens solution firm bought by Warburg Pincus.

 Warburg Pincus, which has a diverse investment portfolio, has targeted investments in the medical technology, pharmaceutical and healthcare space since the 1970s. Its healthcare-related investments total $4.8 billion. The firm’s successful track record includes American Medical Systems and ev3. This latest proposed acquisition will become part of the bidder’s 11th fund, which closed on $8 billion in 2005.

The Bausch & Lomb deal is being lead by managing director Elizabeth Weatherman, who oversees the firm’s medical device investment activities.

Rochester, New York-based Bausch & Lomb has a strong global brand name though the 150-year-old healthcare company has faced significant challenges over the past twelve months, initiating voluntary recalls of some of its flagship ReNu contact lens solution products. Its lens solution market share has dropped 10 percent as a result and lens care sales for 2006 were down 21 percent on the previous year’s volume. These costly disruptions have delayed the release of the company’s SEC filings and have also spawned hundreds of disruptive product-liability lawsuits.

Under private ownership however, the company would be able to deal with these issues away from the public spotlight. Warburg Pincus does not seem phased by these challenges, showing confidence in their target as an “exceptional company, with significant potential”, according to Weatherman.

Bausch & Lomb’s board of directors unanimously endorsed the deal and recommends shareholders approve the merger. The board created an independent special committee to assess the merits of the transaction, which concluded that the agreement is “in the best interest of the Company and our shareholders”. Morgan Stanley acted as the target’s financial advisor.

According to the agreement, Bausch & Lomb has 50 calendar days to solicit superior proposals or respond to unsolicited proposals. This will likely take place behind closed doors. According to a Bausch & Lomb press release, the offer prices the stock at a 26 percent premium to the volume weighted average price for the 30 days prior to press reports containing takeover rumors caused a recent spike in the share price.