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quotes delayed at least 15 minutes, all others at least 20 minutes. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. The main risk is that BHC won't be able to meet the bond covenants due to the current economic issues. 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. That's nowhere close to the $1.29 per share that Wall Street was expecting the company to report. Shares of healthcare name Bausch Health . All rights reserved. Institutional Holdings information is filed by major institutions on form 13-F with the Securities and Exchange Commission. This price range would also allow it to raise $840 million. Do this now. Jobs With Family Housing Provided, 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. No wonder his funds are still the largest shareholder in BHC. The big news from the earnings report today is diluted earnings per share of -19 cents. On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. I have no business relationship with any company whose stock is mentioned in this article. BLCO is the recent spinoff from BHC. For those unfamiliar, Bausch + Lomb is a popular maker of contact lenses and eyecare products. Tennis Blister Treatment, 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. I have no business relationship with any company whose stock is mentioned in this article. However, more interesting than the price action of BLCO since its IPO is the price action of BHC during the same period. Editor's note: Seeking Alpha is proud to welcome Matthew Fry as a new contributor. But of course, it's not that simple. 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. In both cases, the higher BLCO is trading, the better for us as BHC shareholders. 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. I/we have a beneficial long position in the shares of BHC either through stock ownership, options, or other derivatives. All investments are encumbered with the risk of catastrophe, such as, in this case, BHC's pharmaceutical business being hit with surprise lawsuits or the macro environment deteriorating to an extent as to render BHC's stake in BLCO as worthless on paper. outsized gains. Today, it appears the market has agreed. 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? To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. -, 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. According to 17 analysts, the average rating for BLCO stock is "Buy." 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. 15, 2022, 08:22 AM. This was below the company's expected range of between $21 and $24 per share. 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. 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. Keep a close eye on Bausch + Lomb this week. 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. The IPO for Bausch + Lomb ( BLCO) has been priced at between $21 and $24 per share. 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. Shareholders should be aware of the price dip that typically happens to the parent company stock price after a spinoff. 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 Law Did Not Treat Them Kindly. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. It's stock price crashed recently due to Q1 results. Price Target $22.95 ( 39.60% upside) Analyst Consensus: Buy Stock Forecasts News All Videos Press Releases Conversation Recall, that one key issue plaguing BHC is a roughly $20 billion net debt load on the balance sheet. The . More risk-averse investors may instead choose the stability of parent company stock. BHCs stake in BLCO that is set to be distributed to shareholders is worth more than the current market capitalization of the entirety of BHC, giving investors a compelling return. BHC will turn around and buy back bonds in the market at $0.40 on the $1. 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. 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). So I used an extremely conservative 10-year DCF assuming FCF of $1 billion, 0% growth, a 10% discount rate and terminal multiple of 6 (assuming FCF was used to pay down debt, there would be roughly $10 billion left in total liabilities) would yield an intrinsic value of $8.46 billion (or more than 2.3x the current market capitalization). 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. Now, investors are likely familiar with Bausch Health (NYSE:BHC), the rebranded Valeant. Bausch Health Companies ( NYSE: BHC) shares are down 7% following the . I wrote this article myself, and it expresses my own opinions. 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. Public competitors like Alcon (ALC) trade at a multiple of 21+. A carve-out is the partial divestiture of a business unit in which a parent company sells a minority interest of a subsidiary to outside investors. Get Bausch Health Companies Inc (BHC.TO) real-time stock quotes, news, price and financial information from Reuters to inform your trading and investments 1125 N. Charles St, Baltimore, MD 21201. 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. Bausch + Lomb is widely considered the crown jewel held within the Bausch Health portfolio. 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 . What makes this company so intriguing? While spinoffs can outperform in an upward trend they can underperform in a weak market. The BHC spinoff of BLCO took place on May 6 at $20 a share, giving it a market capitalization of $7 billion. Bausch Health Companies' (NYSE:BHC) current market capitalization accounts for both its ownership of Solta Medical (SLTA) and its 90% stake in Bausch and Lomb (NYSE:BLCO). Employees with job insecurity could affect a spinoff's performance. Today, the company has a total enterprise value of $31 billion with a market capitalization under $9 billion. !500 Its wide open future can attract investors, boosting share price. A company may be so large that it's unable to effectively and efficiently manage a division so that it achieves value. Bausch + Lomb is widely considered the crown jewel held within the Bausch Health portfolio. LAVAL, Que. To be held June 14, 2023 . Bausch Health Companies Inc. (NYSE:BHC - Get Rating) - Research analysts at Zacks Research lifted their Q1 2024 earnings per share estimates for shares of Bausch Health Companies in a note issued to investors on Wednesday, April 26th.Zacks Research analyst E. Bagri now forecasts that the company will post earnings per share of $0.93 for the quarter, up from their prior estimate of $0.89. Luckily, BLCO's current market cap is well in excess of BHC's at $5.95 billion. 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. Back to BHC Overview. 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. I wrote this article myself, and it expresses my own opinions. If you have an ad-blocker enabled you may be blocked from proceeding. This valuation of $8.4 billion comes from upper end of the Bausch + Lomb IPO price range of $21-$24. In both cases, the higher BLCO is trading, the better for us as BHC shareholders. 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. (Similar concerns may arise with savings and loan holding Shareholder Agreement Considerations Read More By Julie Randall FED NOTES: Originally published in the Spring 2016 edition of Bank Owner magazine. In case any of these happen, I'm happy to hold BHC or Bausch and Lomb spinoff until the value is realized. That's nowhere close to the $1.29 per share that Wall Street was expecting the company to report. Bausch Health trades on the Nasdaq exchange under the ticker BHC. Conglomerates: Cash Cows or Corporate Chaos? Jan 6, 2023 11:58am. Bausch Health Companies Inc is the largest individual Bausch & Lomb shareholder, owning 310.45M shares representing 88.70% of the company. Best Custom Cakes Orlando, The parent company then can better utilize its own resources for future successes, as well. Spinoffs can have great potential for growth due to their smaller size and a management motivated to achieve success. As a smaller company, the subsidiary has more potential for growth. Other institutions may sell because the spinoff doesn't meet their investment criteria. 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. InvestorPlace - Stock Market News, Stock Advice & Trading Tips. Investors. Adjusted earnings before interest, taxes, depreciation and amortization are forecast at US$3.22 billion to US$3.38 billion, down from US$3.35 billion to US$3.50 billion. Shares of Bausch Health Companies (BHC-5. 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. 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 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. The most valuable piece of the company is Bausch and Lomb. Spinoffs can perform well due to the force of an enthusiastic management that's eager for success and potentially motivated by financial incentives. Yes, but not necessarily in their early years. Generally speaking, after early price drops, spinoff stocks strengthen and offer a positive performance for several years. BLCO: Exchange: NYSE: Shares (millions): 35.0: Price . Bausch + Lomb remains on track to spin off from Bausch Health, following the expiry of customary lock-ups related to the IPO . Pour en savoir plus sur la faon dont nous utilisons vos donnes personnelles, veuillez consulter notre politique relative la vie prive et notre politique en matire de cookies. This valuation of $8.4 billion comes from upper end of the Bausch + Lomb IPO price range . Revenue in 2020 topped $3.3 billion, according to the IPO filing. Bausch & Lomb Corp. has filed paperwork for its initial public offering, nearly a year and half after its parent company, Bausch Health Cos., said it would spin off the eye-care company. 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. As part of this, BLCO stock is expected to start trading on the New York Stock Exchange on Friday, May 6. 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. This popular eyecare brand is set to go public. 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. By my preliminary estimates, BHC loses at. 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. 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. A taxable spinoff is a divestiture of a subsidiary or division by a publicly-traded company, which will be subject to capital gains taxation. The sum of the two stock prices typically approximates the parent company's pre-spinoff stock price. Bausch + Lomb ( NYSE:BLCO - Get Rating) last released its quarterly earnings results on Wednesday, February 22nd. When pharmaceutical companies fell out of favor, Valeant also had to unwind some of its business. It can also be calculated by dividing the company's Market Cap by the Net Profit. This means that shareholders should receive a little less than $1.30 in BLCO stock for every $1.00 of BHC stock that they own. Jobs In Rosslyn Pretoria, To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. Given that BHC's 2022 FCF is expected to be in excess of $1 billion, and the fact that they have a seemingly profitable product pipeline, it seems likely that they will be able to service the remainder of their debt. With our leading durable brands, we are delivering on our commitments as we build an innovative company dedicated to advancing global health. 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. In such a case, a spinoff can help by allowing the parent company to put its efforts to better financial use. Readers are cautioned not to place undue reliance on any of these forward-looking statements. 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. In addition to this, some arbitrageurs may look to unload both stocks after the distribution. BHC) shareholders are up 19% this past week, but still in the red over the last three years (Simply Wall St.) Dec-27-22 08:49AM: . Because, in my view, these multiples are unwarranted for companies with a collective prospective CAGR of 4%. Carl Icahn's 13F portfolio value increased from $21.23B to $21.75B this quarter. 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.

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