Market interest in Bausch Health (BHC) held steady for months. In short order, it fell precipitously ahead
of its initial public offering of the B+L unit. Although B+L (BLCO) rose by 11% on the U.S. markets and
over 6% on the first day of trade, the stock price is well below the initial expected selling range. What
went wrong?
Bausch Health wanted to sell BLCO at $21 to $24. This would value the eye care products and
ophthalmology equipment firm at $6.3 billion. Weak demand and tough market conditions forced the
parent to IPO at $18. This raised $630 million on 35 million shares and is below the $840 million first
expected. Bausch + Lomb will not receive any proceeds from the IPO.
The problem with the spin-off is the parent, BHC, will still have billions in debt. Interest rates are rising
quickly. BHC does not have short-term debt due, so it is in no immediate cash crunch. Unfortunately,
weak stock markets are working against both firms.
BHC’s Salix division is worth more on paper but time is against it. As Salix’s patents expire, markets will
re-value BHC stock accordingly to the downside.
BLCO is worth considering. Its competitor, Alcon (ALC), is also at lows not seen since Aug. 2021.
Investors should consider ALC stock, too.
