Bausch + Lomb is exploring a sale amid the parent company’s debt problems

Investing.com — Bausch + Lomb (NYSE: ) is exploring a potential sale as part of an effort to resolve issues surrounding its separation from parent company Bausch Health, which is saddled with significant debt, according to a Financial Times report.

The move faced opposition from creditors, including Apollo Global Management (NYSE: ).

“This (sale) makes sense to us given the large valuation discount between BLCO and its closest eye care peers,” Wells Fargo analysts said in a note.

The eye care division, spun off from Bausch Health (formerly Valeant) in 2020, is working with Goldman Sachs to gauge interest from potential buyers, with private equity firms expected to be among the interested parties, the report said, citing people familiar with the matter. with the problem. .

While any sale would likely be at a premium to current valuations, given Bausch + Lomb’s strong performance, the process may not necessarily lead to a deal.

Saunders, CEO of Bausch + Lomb, has a reputation as a skilled dealmaker, having previously led the $63 billion sale of Allergan (NYSE: ) to AbbVie (NYSE: ).

Bausch Health retained an 88% stake in Bausch + Lomb after listing the subsidiary in 2022 and planned to exchange the remaining shares for Bausch Health shares.

However, concerns have arisen about whether Bausch Health will remain solvent following the separation, given its heavy debt load. The company would have to pass a solvency test for any division to proceed, the report added.

Bausch Health’s debt stands at $21 billion, with nearly $10 billion due by 2027.

Lenders, including Apollo Global Management, Elliott Management and GoldenTree Asset Management, have expressed concern about the impact a spin-off could have on the parent company’s balance sheet.

However, major shareholders Carl Icahn and John Paulson supported the split because it would give them a bigger stake in the more profitable eye care business.

A sale to private equity could provide a way forward, allowing Bausch Health to use the proceeds to pay down debt while satisfying Icahn and Paulson, who both hold board seats in Bausch Health and its subsidiary .

“We believe a significant percentage of the valuation gap is due to BHC’s surplus,” Wells Fargo said.

Bausch Health is facing more financial problems due to the patent for its main drug, Xifaxan, expiring in 2029 and ongoing legal issues with the drug. This caused its market value to drop to $2.2 billion, raising concerns about the company’s financial stability.

Shares of the global contact lens supplier rose 7.7% in pre-open trade on Monday.