Namely, they are spinning off 20% of their signature eye health business Bausch + Lomb and distributing the remaining 80% to shareholders, IPOing their aesthetic medical device business Solta Medical and leaving their core pharmaceutical and diversified interests as Bausch Health Companies. As a new, smaller company, a spinoff can offer investors attractive potential for growth in share price as it produces solid financial results. For 2021, division revenues jumped by 10.6% to $3.8 billion - part of BHC's overall revenues of $8.4 billion, up 5% - and the company . By my preliminary estimates, BHC loses at. But, as the Oracle of Omaha himself would recommend, focusing on "what's important and knowable," these concerns do not sway my confidence in an investment in BHC common stock. For a company that may only generate a 4% CAGR, a 22.4x EBITDA multiple seems rich. The company reported $0.23 earnings per share for the quarter, beating analysts . At a share price of $15.66, this amounts to a market cap of $5.48 billion, which again, BHC still owns roughly 90% of. We develop, manufacture and market a range of products primarily in gastroenterology, hepatology, neurology, dermatology, international pharmaceuticals and eye health, through our 90% ownership of Bausch + Lomb Corporation. Historically, spinoffs have performed well over the long-term. NOTICE OF 2023 ANNUAL MEETING OF STOCKHOLDERS . Bausch and Lomb can be projected to over the next year to get back to something closer to 2019 EBITDA of over $900 million. In both cases, the higher BLCO is trading, the better for us as BHC shareholders. But, it doesn't matter since it will be free. The spinoff will get a new name and a new management (unless it had an experienced management in place prior to the spinoff). This report by The Canadian Press was first published May 10, 2022. Bausch + Lomb Corporation market data, stock Performance, news and recent insider transactions Bausch + Lomb is widely considered the crown jewel held within the Bausch Health portfolio. Spinoff Definition, Plus Why and How a Company Creates One, Carve-Out: Definition as Business Strategy, Meaning, and Example, Reverse Morris Trust (RMT): Definition, Benefits, and Tax Savings. I am not receiving compensation for it (other than from Seeking Alpha). Today, it appears the market has agreed. So, if we take $7 billion from the $16 billion enterprise value we calculated, we are left with $9 billion of Bausch and Lomb value that will eventually be distributed to shareholders. Shea Moisture Virgin Coconut Oil Body Wash, Johnson and Johnson hygiene products for sale in a supermarket in Madrid, Spain. The plunge of $4.04, or 24.08 per cent, to $12.74 in late-morning trading on the Toronto Stock Exchange came on the final day of its initial public offering for eye-products maker Bausch + Lomb, which debuted Friday on the TSX and New York Stock Exchange and will operate as a separate company after trading closes Tuesday. That said, BLCO stock quickly shot . Accordingly, this deal was largely seen as a way to unlock shareholder value. Notice is hereby given that the 2023 Ann Bausch + Lomb is set to be one of the most intriguing initial public offerings this week, and investors are already gearing up for the BLCO stock IPO. BHC must achieve its target leverage ratio of 6.5-6.7x EBITDA in order for the distribution of 80% of BLCO shares to be distributed to BHC shareholders. Bausch Health, together with its subsidiaries, now holds approximately 90.0% of the common shares of Bausch + Lomb (before giving effect to the over-allotment option). Bausch + Lomb has applied to list its common shares on the New York Stock Exchange . At a share price of $15.66, this amounts to a market cap of $5.48 billion, which again, BHC still owns roughly 90% of. Fortunately, I believe that they are all undervalued at present levels. As a result, investors could see their spinoff stock rise in value. Founded in 1853, Bausch + Lomb has a significant global research and development, manufacturing and commercial footprint with more than 12,000 employees and a presence in nearly 100 countries. Accordingly, this deal was largely seen as a way to unlock shareholder value. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. These statements are based upon the current expectations and beliefs of management and are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The eye health products company is a wholly-owned subsidiary of Bausch Health Companies Inc. (TSX:BHC), and reports of its IPO plan had started surfacing last year. The best-case scenario, namely a distribution of BLCO to shareholders and an IPO of Solta Medical and a multiple expansion for both BLCO and BHC, presents a potential 500% upside for investors. Entering text into the input field will update the search result below. CNBC's Jim Cramer also valued BLCO at $21 billion. Bausch Health reported a loss of US$69 million in its first quarter compared with a loss of US$610 million a year earlier when it took a goodwill impairment charge in its Ortho Dermatologics business. Tealight Candle Holders Bulk, If BHC can get it's leverage down and meet bond covenants, BHC can complete the spinoff by issuing the remaining 80% of the BLCO shares to BHC shareholders. Spinoffs typically have a management that's motivated to succeed. BHC | Complete Bausch Health Cos. Inc. stock news by MarketWatch. Shareholders should be aware of the price dip that typically happens to the parent company stock price after a spinoff. If BHC's business, which recently missed earnings estimates by $1.48 a share, does not generate the increased business it is anticipated to by analysts, it is questionable if they will be able to meet their obligations. Copyright BLCO issued 10% of its shares in the IPO and can issue another 10% as part of a tax free spinoff. This . This comes on a rather mixed day in the markets. The parent company then can better utilize its own resources for future successes, as well. If you have an ad-blocker enabled you may be blocked from proceeding. I applied a 50% margin of safety to this multiple and arrived at the terminal multiple of 15. Bausch Health (NYSE:BHC) is a health care company with 3 distinct lines of business: The company (formerly called Valeant Pharmaceuticals) has had a troubled past that had left it with a huge debt load (over $30 billion) and legal troubles. . Yet, a spinoff is often helmed by enthusiastic officers and managers who are motivated to see the value of their company and its stock emerge and grow. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines. The underwriters will get an option of purchasing an additional 5.25 million common shares of Bausch + Lomb within 30 days. In addition to this, some arbitrageurs may look to unload both stocks after the distribution. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines. Ultimately, spinoffs tend to perform well over time. BHC is almost certainly going to decline in price immediately after the distribution of BLCO not just for the technical reasons outlined above, but because it is separating from arguably its most valuable business. In addition, we will provide investors access to all the research and tools that allow us to generate these ideas. Shares of Bausch Health Companies (BHC-5. Here is why they thought the spinoff would create shareholder value: Financial Market Data powered by FinancialContent Services, Inc. All rights reserved. This is one of a few high-profile IPOs of late that have been priced below its range. As an independent company, the spinoff may focus more effectively on its own operations and flourish. Bausch Health Cos. Inc. BHC, -0.30% filed for an initial public offering of its Bausch & Lomb Corp. unit on Thursday, with plans to list on the New York Stock Exchange, under the ticker "BLCO." The highly anticipated Bausch + Lomb(NYSE:BLCO) initial public offering (IPO) is now a reality, and BLCO stock is now trading. Fitch assumes that administrative claims consume 10% of this value in the recovery analysis. Bausch + Lomb is widely considered the crown jewel held within the Bausch Health portfolio. Bear in mind that spinoff stock prices tend to be more volatile. The BLCO spinoff and Solta Medical IPO proceeds are sufficient for BHC to shoulder its approximately $20 billion debt load. While I believe relative valuation is an important tool, I also believe that industry multiples can occasionally be at the whim of Mr. Market's emotions as well. . BLCO issued 10% of its shares in the IPO and can issue another 10% as part of a tax free spinoff. Find the latest news headlines from Bausch + Lomb Corporation Common Shares (BLCO) at Nasdaq.com. On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. Bausch Health Companies Inc. stock plummeted by a quarter Tuesday morning after the company missed earnings expectations and lowered its outlook for the year. Find the latest Bausch Health Companies Inc. (BHC) stock discussion in Yahoo Finance's forum. Bausch Health Companies Inc is the largest individual Bausch & Lomb shareholder, owning 310.45M shares representing 88.70% of the company. I arrived at this terminal multiple by comparing BLCO to Alcon Inc. (ALC) and Hoya Corp. (7741). But, if you believe that, as Charlie Munger says, "all intelligent investing is value investing," then this technical overhang may create an even more attractive buying opportunity not just for BLCO stock but for BHC as well. On average, both the parent company and the subsidiary outperform the market during the 24-month period following a spin off. BHC - Bausch Health Companies Inc. - Stock screener for investors and traders, financial visualizations. If BHC can get it's leverage down and meet bond covenants, BHC can complete the spinoff by issuing the remaining 80% of the BLCO shares to BHC shareholders. The methodology for Cramer's valuation was based upon Bausch and Lomb's competitor Alcon trading at 22.4x 2021 EBITDA, and given that he projected BLCO's EBITDA at $947 million (which turned out to be $821 million in actuality), he applied the same multiple and arrived at a market cap of $21.1 billion. The volatile price action of a smaller, fast-growing spinoff's stock can mean the potential for lost value. The Price-to-Earnings (or P/E) ratio is a commonly used tool for valuing a company. Current Bausch Health CEO Joseph Papa will remain as chairman until the full separation of Bausch + Lomb this week, when he will be succeeded by Robert Power. However, it. I/we have a beneficial long position in the shares of BHC either through stock ownership, options, or other derivatives. Bausch Health Companies Inc is the largest individual Bausch & Lomb shareholder, owning 310.45M shares representing 88.70% of the company. A wholly owned subsidiary of Bausch Health (the "Selling Shareholder") sold 35,000,000 common shares at a public offering price of $18.00 per share for aggregate gross proceeds of $630 million . BLCO stock has surged, while BHC stock is currently down approximately 3%. On August 6, 2020, Bausch Health Companies Inc. announced that it intends to spin off its leading eye health business into an independent publicly traded entity ("Bausch + Lomb - NewCo") from the remainder of Bausch Health. Following an earnings miss of $1.48 per share and the lower-than-expected IPO price of BLCO, the stock cratered from $16 and change on May 6 to $9.40 on May 10 and $9.72 as of May 31, giving BHC a total market cap of $3.63 billion. Its wide open future can attract investors, boosting share price. That's nowhere close to the $1.29 per share that Wall Street was expecting the company to report. The reported loss of $0.19 per share missed analysts' expectations for a gain of $1.03, however. Because, in my view, these multiples are unwarranted for companies with a collective prospective CAGR of 4%. Add in the roughly $2.2 billion debt that BLCO is taking on, and the company has an enterprise value of $8.5 billion, RBC estimates. The value of the Bausch and Lomb shares is more than the current market capitalization of the entire company. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. In such a case, a spinoff can help by allowing the parent company to put its efforts to better financial use. BLCO stock has surged, while BHC stock is currently down approximately 3%. This was below the companys expected range of between $21 and $24 per share. Bausch + Lomb Corp market cap is $6.11B. The big news from the earnings report today is diluted earnings per share of -19 cents. Last week, it set terms for the initial public offering that could value it at$8.4 billion. Baxter bids adieu to $5B kidney care division with spinout plan. As a result, their individual stock values would eventually surpass the value they had when part of the parent company. I think he might just call it a "no-brainer." The . -, Bausch Health's Ortho Dermatologics Reports FDA New Drug Application Filing Acceptance for Investigational Acne Treatment, Bausch Health Brief: Ortho Dermatologics Announcing U.S. Food and Drug Administration New Drug Application Filing Acceptance for Investigational Acne Treatment IDP-126 Gel, Bausch + Lomb Brief: Releasing Annual Environmental, Social and Governance Report. Companies in this story: (TSX:BHC, TSX:BLCO), 2022 The Canadian Press. All of the common stock offered in the IPO is being sold by the selling shareholder, 1261229 B.C. Once again, this is a steep discount to Cramer's relative valuation of Solta, which he valued at $5.15 billion. The sale of 20% of BLCO and the sale of the entirety of Solta Medical, even at a conservative valuation, are sufficient to allow BHC to shoulder its newly reduced debt load with minimal risk of insolvency. SEC Form 10-12B is a Securities and Exchange Commission (SEC) form a public company must file when it issues a new stock through a spinoff. Get in Now on Tiny $3 Forever Battery Stock, Early Bitcoin Millionaire Reveals His Next Big Crypto Trade On Air, BLCO Stock: 7 Things to Know About the Bausch + Lomb IPO Today, Analyst Expectations for Bausch & Lomb's Future, Bausch + Lomb Corporation (BLCO) Gets a Buy from H.C. Wainwright, Cortigent, developer of human vision restoration devices, files for $17M IPO, Benzinga's Top Ratings Upgrades, Downgrades For March 9, 2023, The Latest Analyst Ratings for Bausch & Lomb, RBC Capital Sticks to Their Buy Rating for Bausch + Lomb Corporation (BLCO), Morgan Stanley Sticks to Its Hold Rating for Bausch + Lomb Corporation (BLCO), Analysts Offer Insights on Healthcare Companies: United Therapeutics (UTHR) and Bausch + Lomb Corporation (BLCO), Registration on or use of this site constitutes acceptance of our, Yesterday, it was announced that Bausch + Lomb would be pricing its IPO at. However, it is better to have a margin of safety to minimize the downside. For one, a company may create a spinoff because, as part of the company, a division didn't fit well with its core competencies. Get the latest Bausch Health Companies Inc. (BHC) stock price, news, buy or sell recommendation, and investing advice from Wall Street professionals. BLCO Stock IPO: When Does Bausch + Lomb Go Public? Luckily, BLCO's current market cap is well in excess of BHC's at $5.95 billion. Companies create a spinoff for several reasons, all of them grounded in added financial return for the parent company. Currently, the stock is up more than 6% in afternoon trading on a strong opening day. Its comprehensive portfolio of more than 400 products includes contact lenses, lens care products, eye care products, ophthalmic pharmaceuticals, over-the-counter products and ophthalmic surgical devices and instruments. !500 Jobs In Rosslyn Pretoria, All ideas will be thoroughly researched and clearly presented. Is It Better Now to Rent or Buy? Analysts Disclosure: I/we have a beneficial long position in the shares of BHC either through stock ownership, options, or other derivatives. This popular eyecare brand is set to go public. Of course, if BLCO performs well and shares appreciate before then, the debt paydown at BHC would be greater, as would the distribution to shareholders in the form of BLCO shares. By my preliminary estimates, BHC loses at. All rights reserved. Today, the total market capitalization of BHC is less than $9 billion. Chris MacDonalds love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. Revenue in 2020 topped $3.3 billion, according to the IPO filing. It can also be calculated by dividing the company's Market Cap by the Net Profit. Bausch Health Companies Inc. (TSE:BHC - Get Rating) - Equities researchers at Zacks Research lowered their FY2023 earnings per share (EPS) estimates for shares of Bausch Health Companies in a . Lorsque vous utilisez nos sites et applications, nous utilisons des, authentifier les utilisateurs, appliquer des mesures de scurit, empcher les spams et les abus; et. So, if we take $7 billion from the $16 billion enterprise value we calculated, we are left with $9 billion of Bausch and Lomb value that will eventually be distributed to shareholders. The main risk is that BHC won't be able to meet the bond covenants due to the current economic issues. Major institutions are defined . The newly public company, Bausch + Lomb Corp., will not receive any proceeds from the sale of the common shares.) Bausch Health Companies Inc's P/E ratio is -11.76. HypeZero provides individual investors with investment ideas that have historically been proven to outperform the market. By selling these shares to BLCO and retiring the shares this allows BHC to still own significant share of BLCO since they. As a smaller company, the subsidiary has more potential for growth. Florham Park, New Jersey 07932 . Seeking Alpha's Disclosure: Past performance is no guarantee of future results. The Second Amendment provides for a new term facility with an aggregate principal amount of $2,500 million (the "2027 Term Loan B Facility") maturing on February 15, 2027 and a new revolving credit facility of $975 million (the "2027 Revolving Credit Facility") that will mature at the earlier of February 15, 2027 and the date that is 91 calendar days prior to the scheduled maturity of indebtedness for borrowed money of Bausch Health and Bausch Health Americas, Inc. ("BHA"), a wholly owned subsidiary of Bausch Health, in an aggregate principal amount in excess of $1,000 million. Notably, spinoffs can present investors with challenges as well as opportunities. This comes on a rather mixed day in the markets. Today, it appears the. A spinoff is the creation of an independent company through the sale or distribution of new shares of an existing business of a parent company. The highly . Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. So, for simplicity, it is best to assume it stays with the remaining company. Parent company shareholders shouldn't be concerned by this price change because they own the spinoff's shares as well. This valuation of $8.4 billion comes from upper end of the Bausch + Lomb IPO price range of $21-$24. So, if we take $7 billion from the $16 billion enterprise value we calculated, we are left with $9 billion of Bausch and Lomb value that will eventually be distributed to shareholders. Upon completion of the IPO, Bausch + Lomb will trade on the NYSE and Toronto stock exchanges under the ticker BLCO. The BHC spinoff of BLCO took place on May 6 at $20 a share, giving it a market capitalization of $7 billion. Assuming management monetizes the additional 8.7% at $15.66, they should be . The stock market continues to grind lower reducing the valuation of the overall market including BHC and its spinoff. At this point if BHC can buy back enough debt in the open market at these prices, $0.40 on the $1, they will make up for the lost deleveraging of the patent decision going against them. Furthermore, one may be hesitant to hold BHC after a BLCO distribution as the company's CEO, Joseph C. Papa, who successfully delevered the company to the tune of more than $10 billion, will take the role as CEO of BLCO and leave BHC. Don't hesitate to tell us about a ticker we should know about, but read the sidebar rules before you post. Bausch + Lomb ( NYSE:BLCO - Get Rating) last released its quarterly earnings results on Wednesday, February 22nd. This will in turn acclerate the spin of the remaining BLCO shares that BHC owns as it will help BHC achieve the 6.7x target. Add in the roughly $2.2 billion debt that BLCO is taking on, and the company has an enterprise value of $8.5 billion, RBC estimates. According to 17 analysts, the average rating for BLCO stock is "Buy." Fitch estimates a standalone reorganized EV for BHC of $11.9 billion and then adds an assumed $1.5 billion to reflect BHC's share of BLCO's equity post BLCO fully drawing down on its revolver, resulting in $13.4 billion of EV available for claimants. Bausch Health is unlocking value by spinning off into 3 separate companies. To be safe, it is better to assign a multiple of 15-20 of Bausch and Lomb as people buying the IPO will want some upside. Shareholders who prefer stability could choose to take profits by selling spinoff shares in an uptrend and continue to hold their company shares. These statements include those set forth above regarding our plan to spin off the Company's eye health business, the ability of each of BHC and Bausch + Lomb - NewCo to focus on distinct therapeutic areas, the anticipated capital structure and financial strength of BHC and Bausch + Lomb - NewCo following the spinoff, the tax treatment of the transaction for the Company and its shareholders . 15, 2022, 08:22 AM. She is a FINRA Series 7, 63, and 66 license holder. Historically, spinoffs have been good for investors. At this point if BHC can buy back enough debt in the open market at these prices, $0.40 on the $1, they will make up for the lost deleveraging of the patent decision going against them. Basic notes from Barron's article. If BHC can get it's leverage down and meet bond covenants, BHC can complete the spinoff by issuing the remaining 80% of the BLCO shares to BHC shareholders. Tennis Blister Treatment, The offering is for 35M shares. This will in turn acclerate the spin of the remaining BLCO shares that BHC owns as it will help BHC achieve the 6.7x target. However, the stock price has not reflected the progress made by management and the true intrinsic value. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective. If you have an ad-blocker enabled you may be blocked from proceeding. Today, it appears the. The Selling Shareholder also intends to grant the underwriters a 30-day option to purchase up to an additional 5.25 million common shares of Bausch + Lomb to cover over-allotments, if any. Forward-looking StatementsThis news release may contain forward-looking statements about the Bausch + Lomb and Bausch Health, which may generally be identified by the use of the words "anticipates," "hopes," "expects," "intends," "plans," "should," "could," "would," "may," "believes," "subject to" and variations or similar expressions, including statements about Bausch + Lomb's ability to comply with the financial and other covenants contained in the Bausch + Lomb Credit Agreement and Bausch Health's ability to comply with the financial and other covenants contained in the Second Amendment to the Existing Credit Agreement. For conservatism's sake, let's assess BHC's prospects if the BLCO distribution does not take place. The Selling Shareholder has granted the underwriters a 30-day option to purchase up to an additional 5,250,000 common shares of Bausch + Lomb to cover over-allotments, if any, at the initial public. All rights reserved., source Canadian Press DataFile. GameStop Forecast: Can GME Stock Prove the Skeptics Wrong in 2023? Bausch Health Companies Inc's Bausch & Lomb shares are currently valued . I have no business relationship with any company whose stock is mentioned in this article. While spinoffs can outperform in an upward trend they can underperform in a weak market. When a spinoff's shares start trading on a stock exchange, the value of the parent company's stock may drop by the value of the new company's stock. Bausch + Lomb Corporation (NYSE/TSX: BLCO) is a leading global eye health company that is dedicated to protecting and enhancing the gift of sight for millions of people around the world - from the moment of birth through every phase of life. Bausch & Lomb ( NYSE: BLCO) is owned by 10.32% institutional shareholders, 89.01% Bausch & Lomb insiders, and 0.68% retail investors. If a company has sought, but failed to interest, a buyer in purchasing a division, it may decide that a spinoff is its next best option. Carl Icahn's 13F portfolio value increased from $21.23B to $21.75B this quarter. Bausch Health Companies, formerly Valeant Pharmaceuticals, is undergoing a restructuring to pay down debt and unlock shareholder value. When terms of the deal were released in late April . The IPO for Bausch + Lomb ( BLCO) has been priced at between $21 and $24 per share. This gives investors an ample margin of safety while allowing for the potential of outsized gains. A plan to merge Daum Communications, the nation's second-largest Internet portal, with the top mobile messenger service, Kakao, may face a stumbling block if dissenting shareholders excessively exercise their appraisal rights. As a result, spinoff stock can underperform when markets are weak and outperform when markets are strong. About Bausch + Lomb Bausch + Lomb, a leading global eye health business of Bausch Health Companies, Inc., is dedicated to protecting and enhancing the gift of sight for millions of people around the world from the moment of birth through every phase of life. Following an earnings miss of $1.48 per share and the lower-than-expected IPO price of BLCO, the stock cratered from $16 and change on May 6 to $9.40 on May 10 and $9.72 as of May 31, giving BHC a . Accordingly, this deal was largely seen as a way to unlock shareholder value. Bausch Health Companies Inc. stock plummeted by a quarter Tuesday morning after the company missed earnings expectations and lowered its outlook for the year. On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. $24,185. Investors who prefer more stable returns tend to stick with the parent company. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body. Accordingly, BLCO stock will be an interesting one to watch from here. Northeastern University Undergraduate studying finance.I write about special situations, deep and growth value stocks as well as short ideas.Contact Information:Email: fry.m@northeastern.edu. The number of shares that a parent company shareholder receives is based on the number they own in the parent company. That's a 9.3% decline. Today, it appears the market has agreed. So, in the words of legendary fund manager Mohnish Pabrai, this is a "heads I win, tails I don't lose much" scenario. The story would be different if we were investment bankers incentivized to justify valuations, but we are investors tasked with determining absolute, not relative, value.
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