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Boston College Law School

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Wednesday, May 16, 2007

Bausch & Lomb Blinks

Bausch & Lomb today announced that it had agreed to be acquired by Warburg Pincus, the private equity firm, in a transaction valued at approximately $4.5 billion, including approximately $830 million of debt. Warburg Pincus will pay $65.00 per share in cash in the transaction.  There is no financing condition on the deal. 

Bausch & Lomb has been a rumored takeover candidate for the past month, and as I blogged before, has been cleaning itself up for a sale as it recovers from the recall and subsequent discontinuation of its ReNu and MoistureLoc contact lens solution, after the product was connected with a rare fungal eye infection that can cause blindness.

Two notable aspects of the transaction.  First the transaction is yet another one where Wachtell negotiated a 50-day "go-shop".  Baush & lomb will have a fifty day period to solicit superior proposals.  Second, the deal has an abnormally low break-fee of $40 million or approximately 1% of the transaction value. 

I have previously blogged before here and here about the illusory nature of "go-shops"; they tend to cover for an undue head start for the initial acquirer and management involvement in the initial acquisition agreement.  According to one recent study, only one "go-shop" provision has solicited a higher bid since 2004.  The lower break-up fee here will help ameliorate these issues, but still, given the head start of Warburg and possible management involvement (the extent of their involvement here is still unclear), you have to wonder whether this yet another "go-shop" provision that will find no one willing to buy.    

http://lawprofessors.typepad.com/mergers/2007/05/bausch_lomb_bli.html

Private Equity, Takeovers, Transaction Defenses | Permalink

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