The main risk is that BHC won't be able to meet the bond covenants due to the current economic issues. The focus on operations, sales, and revenue can be given full rein since leaving the parent company. A company may be so large that it's unable to effectively and efficiently manage a division so that it achieves value. Fitch assumes that administrative claims consume 10% of this value in the recovery analysis. This occurs because assets that now belong to the subsidiary are removed from the parent company's books, which lowers the parent company's book value. The IPO for Bausch + Lomb ( BLCO) has been priced at between $21 and $24 per share. Ltd., a wholly owned subsidiary of Bausch Health Companies Inc. ("BHC"). It's calculated by multiplying the current market price by the total number of shares outstanding. However, more interesting than the price action of BLCO since its IPO is the price action of BHC during the same period. This could put it at a disadvantage and make it an investment to avoid. While this approach may have worked in 2021, the momentous multiple correction we are witnessing in the capital markets right now makes me uncomfortable with assigning such a multiple to a company with an anticipated 4% market growth rate. When Valeant acquired Bausch + Lomb, the eye products company's annual revenue was nearly $1.3 billion. Copyright 2023 Surperformance. I have no business relationship with any company whose stock is mentioned in this article. 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. For those unfamiliar, Bausch + Lomb is a popular maker of contact lenses and eyecare products. Specifically, the true gem of the company is the Bausch and Lomb unit that stands to trade at a much higher multiple as a standalone company with a better capital structure. Share your opinion and gain insight from other stock traders and investors. View real-time stock prices and stock quotes for a full financial overview. I can't believe that this has . That's nowhere close to the $1.29 per share that Wall Street was expecting the company to report. The parent company then can better utilize its own resources for future successes, as well. For validation of the conservatism of this estimate, look no further than Bloomberg News, which pegged BLCO's potential valuation at $20-$30 billion. As a result, investors could see their spinoff stock rise in value. The net proceeds from the IPO, together with the proceeds from Bausch Health's term loans under the 2027 Term Loan B Facility, funds received from Bausch + Lomb from its borrowings under its new term loan facility as repayment of an intercompany note and cash on hand, were used to (i) repay Bausch Health's existing term loans and (ii) fund the previously announced conditional redemption of all of Bausch Health's 6.125% Notes due 2025 at a redemption price of 101.021% of the principal amount thereof. As a result, spinoff stock can underperform when markets are weak and outperform when markets are strong. The main risk is that BHC won't be able to meet the bond covenants due to the current economic issues. 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. View real-time stock prices and stock quotes for a full financial overview. Bausch + Lomb rose about 3% in Friday's trading but remained well below its disappointing IPO price of $18. 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." I think he might just call it a "no-brainer." 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. Bausch + Lomb is widely considered the crown jewel held within the Bausch Health portfolio. Almost any post related to stocks is welcome on /r/stocks. Bausch Health Companies ( NYSE: BHC) shares are down 7% following the . Even though management intends to distribute 80% of BLCO to shareholders and sell its stake in Solta Medical via an IPO in order to pay off debt, BHC is worth more now than the market is valuing it even if the restructuring does not take place. A spinoff is created when a company forms some part of its operations into a separate entity and distributes shares in it tax free to shareholders of the parent company. For example, a large company with many divisions may have a stock price that management feels understates the value of those divisions. Johnson and Johnson hygiene products for sale in a supermarket in Madrid, Spain. The stock didn't begin to tumble until Thursday when it hit its 52-week low of $4 a share. The BHC spinoff of BLCO took place on May 6 at $20 a share, giving it a market capitalization of $7 billion. 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. Bausch Health Companies Inc is the largest individual Bausch & Lomb shareholder, owning 310.45M shares representing 88.70% of the company. As far as valuing Solta Medical goes, I think $2 billion is a comfortably conservative valuation for a company growing at more than 30% per year with greater than $100 million in EBITDA and greater than $80 million in FCF. By my preliminary estimates, BHC loses at. However, the stock price has not reflected the progress made by management and the true intrinsic value. The highly . 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. outsized gains. Accordingly, this deal was largely seen as a way to unlock shareholder value. As Bausch Health is the entity. 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. She has been an investor, entrepreneur, and advisor for more than 25 years. Solta Medical is relatively much smaller. Please disable your ad-blocker and refresh. This information, taken in isolation, makes BHC stock look like a stark-raving no-brainer that will allow you to team up with Carl Icahn (who owns over 9% of BHC) to make money on a stock that has stumped some of the greatest investors of our time (such as Bill Ackman). BHC - Bausch Health Companies Inc. - Stock screener for investors and traders, financial visualizations. Luckily, BLCO's current market cap is well in excess of BHC's at $5.95 billion. 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. Analysts Disclosure: I/we have a beneficial long position in the shares of BHC either through stock ownership, options, or other derivatives. Unless BLCO stock soars for example, closing above $30 a share when it ends first-day trade on the NYSE today, I expect other companies waiting on the IPO runway to delay going public. View original content to download multimedia:https://www.prnewswire.com/news-releases/bausch-health-and-bausch--lomb-corporation-announce-closing-of-initial-public-offering-of-bausch--lomb-and-related-debt-transactions-301544176.html, SOURCE Bausch Health Companies Inc.; Bausch + Lomb Corporation, View original content to download multimedia: http://www.newswire.ca/en/releases/archive/May2022/10/c4801.html, https://www.prnewswire.com/news-releases/bausch-health-and-bausch--lomb-corporation-announce-closing-of-initial-public-offering-of-bausch--lomb-and-related-debt-transactions-301544176.html, http://www.newswire.ca/en/releases/archive/May2022/10/c4801.html, Man who lost wife, son in Texas mass shooting tells story, E. Jean Carroll resumes testimony in Trump rape trial after mistrial denied, Michael J. After more than a year of planning and preparing for the optimal way to split the company, Bausch recently announced the exact details. The reported loss of $0.19 per share missed analysts' expectations for a gain of $1.03, however. I arrived at this multiple by constructing a 10-year DCF model starting with $650 million in FCF, an aggressive 10% discount rate, conservative 4% growth rate and conservative terminal multiple of 13. While technical overhang is usually strongest when a company spins off a small or non-essential component of its business, it may still be present in this case where BHC is spinning off arguably its most attractive business. Such a relative valuation is, in my view, inappropriate. 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. Assuming management monetizes the additional 8.7% at $15.66, they should be . 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 . Active contributors also get free access to SA Premium. . Once again, this is a steep discount to Cramer's relative valuation of Solta, which he valued at $5.15 billion. Also today, Bausch Health notified the Trustee and holders of its outstanding 9.000% Senior Notes due 2025 that the conditions to its previously announced conditional redemption of such notes would not be satisfied, and the conditional redemption was cancelled. Price Target $22.95 ( 39.60% upside) Analyst Consensus: Buy Stock Forecasts News All Videos Press Releases Conversation When Valeant acquired Bausch + Lomb, the eye products company's annual revenue was nearly $1.3 billion. Since BLCO IPOed, it has traded as low as $16.24 and sits at $17.01 as of May 31. For conservatism's sake, let's assess BHC's prospects if the BLCO distribution does not take place. Nous, Yahoo, faisons partie de la famille de marques Yahoo. Tennis Blister Treatment, The newly public company, Bausch + Lomb Corp., will not receive any proceeds from the sale of the common shares.) We have not yet dealt with the potentially problematic technical overhang incumbent upon BLCO's stock subsequent to an equity distribution to shareholders. Find out the direct holders, institutional holders and mutual fund holders for Bausch Health Companies Inc. (BHC). August 27, 2020 - Update. Click here to see an update on the portfolio's trades for Q4 2022. A spinoff is created when a company forms some part of its operations into a separate entity and distributes shares in it tax free to shareholders of the parent company. Florham Park, New Jersey 07932 . 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. Today, it appears the market has agreed. 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. Bausch Health first signaled its intent to take Bausch & Lomb public in 2020 and was widely expected to sell a 20% stake at a higher price range. This popular eyecare brand is set to go public. Chris Schott thinks Bausch spin-off would do $870MM . 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. 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 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. 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. Bausch + Lomb rose about 3% in Friday's trading but remained well below its disappointing IPO price of $18. Bausch + Lomb Corp market cap is $6.11B. Thus far, BHC has not yet IPOed Solta Medical and has only sold 10% of its stake in BLCO and is still planning on selling an additional 10% in the open market. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. This valuation of $8.4 billion comes from upper end of the Bausch + Lomb IPO price range of $21-$24. Now, what would Carl Icahn call an opportunity such as BHC where the risk of permanent capital loss absent a business calamity was inordinately low and a potential, albeit variable, upside of 5x (based on my conservative valuations) was present? Today, investors have yet another stock to add to their watchlists. Baxter bids adieu to $5B kidney care division with spinout plan. VAUGHAN, Ontario--(BUSINESS WIRE)-- Bausch + Lomb (NYSE/TSX: BLCO) ("Bausch + Lomb" or the "Company"), a leading global eye health company dedicated to helping people see better to live better, today announced the election of the 10 directors nominated at its 2023 annual meeting of shareholders (the "Annual Meeting") held on April 24, 2023. $24,185. LAVAL, Que. Another common reason for spinoffs is to improve stock value. The stock market continues to grind lower reducing the valuation of the overall market including BHC and its spinoff. This valuation of $8.4 billion comes from upper end of the Bausch + Lomb IPO price range of $21-$24. ALC and Hoya Corp.'s respective forward FCF to market cap ratios average out to slightly >30. Bausch and Lomb can be projected to over the next year to get back to something closer to 2019 EBITDA of over $900 million. The company's current CEO, Joseph Papa, who took over 5 years ago has cleaned up the company by settling the legal cases and reducing debt by ~$10 billion to $22 billion. CELULARITY INC. 170 Park Ave . Generally speaking, after early price drops, spinoff stocks strengthen and offer a positive performance for several years. The remaining Bausch and Lomb shares will be distributed to shareholders. The sum of the two stock prices typically approximates the parent company's pre-spinoff stock price. Source: OleksandrShnuryk / Shutterstock.com, Plus500. This comes on a rather mixed day in the markets. 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. Bausch Health Companies Inc. stock plummeted by a quarter Tuesday morning after the company missed earnings expectations and lowered its outlook for the year. Zhiyun Crane 3 Lab Battery Charger, Now, the BLCO stock IPO will split out Bausch + Lomb from the parent company in an attempt to unlock shareholder value. All of the common stock offered in the IPO is being sold by the selling shareholder, 1261229 B.C. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. The plan is to launch a Bausch and Lomb debt offering (~2 billion/2.5x net leverage), an IPO of Bausch and Lomb ("up to 20%"), an IPO of Solta Medical ("20 to 30%") and use to proceeds to pay down $7 billion of debt to reduce the net leverage of the remaining company (Bausch Pharma) to 6.5-6.7x. Shea Moisture Virgin Coconut Oil Body Wash, Last week, it set terms for the initial public offering that could value it at$8.4 billion. BLCO is currently trading over $15. Check out our wiki to learn more! The spinoff will get a new name and a new management (unless it had an experienced management in place prior to the spinoff). Chris Schott thinks Bausch spin-off would do $870MM . This is because highly levered firms provide tremendously skewed risk/reward opportunities. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. The remaining 80% is being used as collateral for BHC's 20B+ debt. In fact, because BLCO was such an attractive asset to BHC, some shareholders of BHC may unload BHC after the equity distribution. The focus on innovation has helped to grow the top line. Bausch Health's Ortho Dermatologics Reports FDA New Drug Application Filing Acceptance .. Bausch Health Brief: Ortho Dermatologics Announcing U.S. Food and Dr.. Bausch + Lomb Brief: Releasing Annual Environmental, Social and Gove.. Bausch + Lomb to Present New Scientific Data on Products, Pipeline Programs at Cataract.. Bausch + Lomb Brief: Announcing Presentation of New Scientific Data .. Bausch Health : Salix Partners with the Colorectal Cancer Alliance on Community Screening .. Bausch + Lomb Detailing New Options For Dual-action Protection During Cataract Surgery. Bausch Health Companies Inc. (NYSE:BHC - Get Rating) - Zacks Research lifted their Q1 2024 earnings per share (EPS) estimates for shares of Bausch Health Companies in a report released on . Of course, they could also decide a spinoff isn't wise and sell shares in response to the news. Source: OleksandrShnuryk / Shutterstock.com, 5 Hypergrowth Stocks With 10X Potential in 2023. This was below the company's expected range of between $21 and $24 per share. While I have illuminated the valuation arbitrage opportunity apparent in the BLCO spinoff, I have not proffered any valuations of BHC, BLCO, and Solta Medical of my own. BHC has a debt load in excess of $20 billion and being that BLCO contributed hundreds of millions in FCF per year its creditors will obviously shun the proposed distribution. All rights reserved. As part of this, BLCO stock is expected to start trading on the New York Stock Exchange on Friday, May 6. In addition, actual results are subject to other risks and uncertainties that relate more broadly to Bausch Health's and Bausch + Lomb's overall business, including those more fully described in Bausch + Lomb's and Bausch Health's respective filings with the U.S. Securities and Exchange Commission and the Canadian securities administrators, which factors are incorporated herein by reference. The S1 was filed subsequently for Bausch and Lomb. 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 $630 million . Find the latest Bausch Health Companies Inc. (BHC) stock discussion in Yahoo Finance's forum. As a new, smaller company, a spinoff can offer investors attractive potential for growth in share price as it produces solid financial results. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. (NYSE: BLCO) has been in the works for some time . The Price-to-Earnings (or P/E) ratio is a commonly used tool for valuing a company. All rights reserved., source Canadian Press DataFile. Bausch Health and Bausch + Lomb undertake no obligation to update any of these forward-looking statements to reflect events or circumstances after the date of this news release or to reflect actual outcomes, unless required by law. Jan 6, 2023 11:58am. The 12-month stock price forecast is 22.95, which is an increase of 39.60% from the latest price. #Shares: Value ($) #Shares Total: SEC Form 4: Carson Seana: EVP, General Counsel: Feb 28: Sale: 9.32 . Heres What the Housing Market Crisis Says. When pharmaceutical companies fell out of favor, Valeant also had to unwind some of its business. Ultimately, investors should thoroughly research a spinoff to decide whether to invest or not. Bausch + Lomb Brief: Detailing New Options For Dual-action Protectio.. Bausch + Lomb Announces Presentation of New Data on Products and Pipeline Programs at O.. Bausch + Lomb Brief: Announcing Presentation of New Data on Products.. Bausch Health Price Target Raised to US$10 (From US$8), Market Perform Rating Maintaine.. RBC Lifts Price Target on Bausch Health to $9 From $8, Maintains Sector Perform Rating. Entering text into the input field will update the search result below. We have now voided the risk of underperformance of BLCO's core business negatively affecting investor sentiment by performing an unduly conservative valuation of it. . 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. 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. Eye Health (Bausch and Lomb) which is "comprised of OTC Bausch + Lomb products, with a focus on the Vision Care, Surgical, Consumer and Ophthalmology Rx products", Bausch Pharma, "a diversified pharmaceutical company which will include the Company's Salix, International Rx, dentistry, neurology, medical dermatology, and generics pharmaceutical businesses", Solta, "a global provider of aesthetic medical devices". 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. In such a case, a spinoff can help by allowing the parent company to put its efforts to better financial use. Revenue for the quarter ended March 31 totalled US$1.92 billion, down from US$2.03 billion in the same period last year. Bausch + Lomb Corporation market data, stock Performance, news and recent insider transactions BHC will turn around and buy back bonds in the market at $0.40 on the $1. Shareholders who prefer stability could choose to take profits by selling spinoff shares in an uptrend and continue to hold their company shares. They tend to outperform over time. Investors. Depending on their point of view, such a time could offer existing shareholders the opportunity to buy or sell parent company shares. 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. 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 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. Notice is hereby given that the 2023 Ann Companies in this story: (TSX:BHC, TSX:BLCO), 2022 The Canadian Press. That's nowhere close to the $1.29 per share that Wall Street was expecting the company to report. Today, it appears the market has agreed. As part of this, BLCO stock is expected to start trading on the New York Stock Exchange on Friday, May 6.
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