Eye-care company Bausch & Lomb Inc still dealing with widespread product recalls that have delayed financial reports, said on Wednesday it agreed to be acquired by private equity firm Warburg Pincus for about $ 3.67 billion.
Under the terms of the deal, Warburg Pincus will acquire all of the outstanding shares of Bausch & Lomb common stock for $65 per share in cash. It will also assume about $ 830 million in debt.
Shares of the company were trading at $ 67.40 in pre-market activity, an indication that investors may expect a higher bid.
The offer is only a 5.7 per cent premium to where Bausch & Lomb shares closed on Tuesday, but its shares have been on a sharp ascent for several weeks due to rumors that it would be a target of a leveraged buyout.
The deal is not a surprise given the stock's action, Robert W Baird analyst Jeffrey D Johnson said.
"This looks like a pretty fair deal," Johnson said.
The share price's pre-market rise to $ 67 -- above the $ 65-a-share announced deal price -- suggests speculation of a higher bid, Johnson said.
"If I were a shareholder here, I would not be expecting much upside from the $ 67," Johnson said.
Warburg Pincus 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 Reuters Estimates
By going private, Bausch will be able to address its issues away from the investor spotlight, Johnson 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, Johnson 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 Warburg Pincus.