Bausch + Lomb Buyout “Sorta” Worth Thinking About: CEO Frazier

This is really no surprise — Mr. Frazier, on behalf of the shareholders, is always supposed to keep an open mind about transactional opportunities to boost returns. But I read this as little more than that.

Remember that only about five days ago he told the bankers running the B + L deal process that even though Merck’s consumer health business is a smaller contributor — and he is looking at ways to increase the contribution — he was relatively happy with it.

And adding perhaps $10 billion to the allocated capital the consumer health unit needs to cover, for EPS purposes, given the relatively lower margin businesses/franchises B + L operates [as compared to say Merck’s Isentress® (HIV) or Victrelis® (HCV)]. . . seems a bit of a stretch. At that price, it would be a higher multiple of current year’s sales (around 3.2X) than Merck paid for all of legacy Schering-Plough (around 2.2X). [Nice try, Fred!]

And so, this is very likely just idle investment conference chatter, so as not to offend Goldman’s bankers — who took the time to pitch B + L to Whitehouse Station over the holidays.

Here is the Bloomberg item — for what it is worth — but do go read it all:

. . . .“It’s something that’s worth thinking about, that’s the most I can say,” Frazier said in an interview yesterday at the JPMorgan Chase & Co. health conference in San Francisco.

Warburg, working with Goldman Sachs Group Inc., is giving interested parties access to its financial data and seeking first-round bids by month’s end, said people with knowledge of the matter, who asked not to be named because the process is private. Warburg is seeking at least $10 billion for the business, these people said. Goldman Sachs contacted some prospective bidders including Merck before Christmas with information about Bausch & Lomb, said one of the people.

Frazier has said that he’s happy with Merck’s diversified business model, which includes animal health and consumer health units. . . .

So, file this one under “the price makes the horse” (or doesn’t!), right? Of course, as ever, we will keep you posted if this gets serious.


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