- Bausch + Lomb is seeking to raise almost $2 billion to fund its planned acquisition of Xiidra eye drops from Novartis.
- The eye health company struck a deal in June to buy the dry eye disease treatment Xiidra and other assets for $1.75 billion, and followed up by agreeing to pay Johnson & Johnson $107 million for a line of eye and contact lens drops. It has the cash to fund the J&J deal but needs to arrange financing to close the larger acquisition of the Novartis assets.
- Fitch Ratings, in a note to investors, said the Xiidra deal will boost Bausch + Lomb’s ophthalmic pharmaceutical market presence while the company’s R&D efforts help drive revenue growth in the longer term.
Bausch + Lomb, which split from parent company Bausch Health last year, has identified two ways to strengthen its balance sheet ahead of the closure of the Xiidra deal. First, the company is offering $1.4 billion in new senior notes due 2028. Second, Bausch + Lomb wants to enter into an incremental term loan facility that could see it borrow $500 million.
Collectively, the two strands of the planned financing are large enough to fund the acquisition of Xiidra and the other Novartis assets, pay fees and expenses related to the deal and still have some money left for general corporate purposes, including the repayment of existing debt. Bausch + Lomb had $2.6 billion in long-term debt at the end of June.
In a note to investors, Fitch Ratings said the Xiidra deal and the actions taken to fund it will increase Bausch + Lomb’s leverage in the intermediate term, but the analysts view the takeover as “strategically sound.” The analysts’ support for the strategy rests on the belief the deal will increase Bausch + Lomb’s presence in the ophthalmic pharmaceutical market.
“Aging demographics, improved income demographics in emerging markets, increasing digital screen times and the ongoing increase in the incidence of diabetes will likely drive low- to mid-single-digit growth in the demand for eye health products and services during the intermediate term,” the analysts wrote.