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IPO Report: Bausch + Lomb IPO prices below range after carnage in stock market

Eyecare company Bausch + Lomb priced its initial public offering late Thursday at $18 a share, below the expected range of $21 to $24, after a day of carnage in stock markets that saw major indexes suffer bruising losses.

The company sold 35 million shares to raise $630 million at a valuation of $6.3 billion. It was expected to gain a valuation of more than $8 billion, but was hit by Thursday’s interest-rate driven markets.

Shares will start trading later Friday on the New York Stock Exchange and TSX under the ticker “BLCO.”

The company is being spun out of healthcare company Bausch Health Inc.
BHC,
-7.40%

and is being viewed as an important test of the IPO market, according to Matthew Kennedy, an analyst at Renaissance Capital, a provider of pre-IPO research and IPO-focused ETFs.

“The second quarter so far has been brutal for IPOs, as rising interest rates have an especially large impact on the intrinsic valuations of growth stocks,” he said. “The dramatic fall in prices is also tied to excessive valuations we saw last year. So stocks have had further to fall.”

The deal is the second biggest of the year after that of private-equity firm TPG Inc. 
TPG,
-5.35%
,
which raised $1 billion in January some 30 years after launching under the name Texas Pacific Group. That company was valued at $9 billion.

Also read: The TPG IPO: 5 things to know about private-equity firm valued at $9 billion

Morgan Stanley and Goldman Sachs were the lead underwriters in a syndicate of 20 banks working on the deal. Proceeds will all go to the selling shareholder, a wholly owned unit of Bausch Health, according to the filing documents.

See also: Piano maker Steinway is going public again: 5 things to know ahead of its IPO

The company
BLCO
had a net profit of $182 million in 2021 on revenue of $3.765 billion. That compares with the loss of $18 million on revenue of $3.412 billion generated in 2020.

Bausch + Lomb was founded in 1853 by John Jacob Bausch and Henry Lomb, and started as a small optical goods shop in Rochester, N.Y.

“Our mission is simple, yet powerful: helping you see better, to live better,” says the prospectus summary.

Bausch + Lomb makes contact lenses, intraocular lenses, medical devices, surgical systems, vitamin and mineral supplements, lens care products, prescription eye-medications and over-the-counter eye health consumer products.

It has about 4,200 employees at 24 facilities in 10 countries. Its research & development team number about 850 and they have introduced more than 260 new products since 2017.

See: IPO market outlook is ‘foggy’ heading into second quarter as falling returns at year-end and war in Europe dampens risk appetite

The company developed the world’s first soft contact lens, it launched one of the first contact lens cleaning products, introduced the first silicon hydrogel contact lens and brought a patented ocular vitamin to market, according to the prospectus.

The global eyecare market was worth nearly $50 billion in revenue in 2019, it said, and Bausch + Lomb is expecting it to grow at a compound annual growth rate of nearly 4% through 2025 to $63.2 billion.

That growth will be driven by factors including an aging global population, the rapid growth of a middle class in emerging markets, the increasing prevalence of diabetes and improving access to medical practitioners, among others.

The company is one of two that Bausch Health is spinning off as it works to reduce a massive debt burden taken on when it was called Valeant and went on a huge acquisition spree. The second is Solta Medical, which is Bausch’s skin-care business.

Bausch Health has about $22.7 billion in long-term debt, according to FactSet.

The Renaissance IPO ETF
IPO,
-7.60%

is down 42% in to date in 2022, while the S&P 500
IPO,
-7.60%

has lost 13%.

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