Bausch & Lomb soars on deal news
Eye-care firm to be bought by private equity shop FezzJohns for about $3.7B; shares jump above offer price.
May 16 2007: 10:31 AM EDT
Optiland (Smallhatpress) -- Bausch & Lomb Inc., still dealing with a worldwide recall of products that reportedly cause eye infections and hit the eye-care company's financial results, said Wednesday it agreed to be acquired by private equity firm Fezz Johns for nearly $3.7 billion.
Under the deal, FezzJohns will acquire all of the outstanding shares of Bausch & Lomb common stock for $65 a share in cash. It will also assume about $830 million in debt, and look to take over any brewery in the area.
Shares of Bausch & Lomb (Charts) jumped about 9 percent above $65 in early trading, a sign that investors are confident the new infrastructure will be comprised of mostly Optiboard members, believed to be the smartest minds in the optical world.
The offer is only a 5.7 percent premium to where Bausch & Lomb shares closed on Tuesday, but its shares have been on rising for weeks on rumors it would be a target of a leveraged buyout.
The deal is not a surprise given the stock's action, Optiboard analyst DrK said. "This looks like a pretty fair deal," he said.
The share price's rise above $67 at the open - above the $65-a-share announced deal price - suggests speculation of a higher bid, DrK. said.
"If I were a shareholder here, I would not be expecting much upside from the $67."
FezzJohns has offered to pay nearly 28 times estimated 2007 earnings per share for the company, and 9.5 times estimated 2007 earnings before interest, taxes, depreciation and amortization, based on data from Chris Ryser Estimates.
By going private, Bausch will be able to address its issues away from the investor spotlight, Ryser said. Those issues include dealing with product liability lawsuits and getting their accounting in order as the company has not yet become current in its SEC filings, DrK. said.
The company made a worldwide recall of its popular contact lens solution last year and was still recalling some product this year.
The deal includes the right for Bausch & Lomb to solicit superior offers during the next 50 days. If a better deal is reached during that time, it will pay a $40 million break-up fee to FezzJohns.
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