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Majority: B&L sale is bad for employees

Rochester Business Journal
June 7, 2013

Nearly three out of four respondents to this week's RBJ Daily Report Snap Poll say that in the long run, the planned acquisition of Bausch & Lomb Holdings Inc. by Valeant Pharmaceuticals International Inc. is not good for B&L employees.
 
An independent, Rochester-based company for 160 years, Bausch & Lomb recently agreed to be acquired and become a division of Quebec-based Valeant. A publicly traded company with $3.6 billion in 2012 revenues, Valeant (NYSE: VRX) will pay $8.7 billion in cash.
 
Bausch & Lomb shares traded publicly from 1958 to 2007, when an investor group led by the private-equity firm Warburg Pincus LLC bought the Rochester business icon for $3.7 billion and took it private. The deal with Valeant calls for the private-equity investors to receive roughly $4.5 billion; some $4.2 billion will be used to repay Bausch & Lomb's debt.
 
"Valeant's acquisition of our company is a testament to the tremendous value our talented employees have created over the past several years," said Brent Saunders, Bausch & Lomb CEO, in a statement.
 
As CEO, Saunders worked to reshape the culture at Bausch & Lomb, which over the previous 15 years had faced accusations of fudged sales figures and product recalls. He moved most of the firm's executives out of the 20-story world headquarters that Bausch & Lomb had built downtown in the early 1990s, relocating them to the firm's Goodman Street manufacturing and research complex.
 
Filings show net losses attributable to Bausch & Lomb in 2010-12 were $196 million, $123.9 million and $68.3 million, respectively. Net sales rose from $2.6 billion in 2010 to $3 billion in 2012.
 
Valeant, which plans to borrow $7.5 billion to finance the acquisition, expects to achieve at least $800 million in annual cost savings by the end of 2014. Chairman and CEO Michael Pearson told analysts last week that Bausch & Lomb can expect major reductions in its sales, general and administrative costs and that research and development of new products will not be a major driver of its future growth.
 
One analyst described the deal as "a positive event, both strategically and financially," adding that "the combined eye health franchise should benefit from scale that neither company could have generated on its own."
 
Three-quarters of readers are pessimistic about what Valeant's acquisition will mean for the Rochester community, however.
 
Nearly two-thirds said Warburg Pincus' ownership of Bausch & Lomb has been good for the company and its employees.
 
In September 2007, a majority of respondents to an RBJ Snap Poll said approval of Warburg Pincus LLC's $65-a-share offer for Bausch & Lomb would be good for the company's shareholders, but an even larger percentage-68 percent-said the sale would be a negative for the community's long-term well-being.
 
Evaluating the Warburg Pincus deal's impact on B&L's long-term prospects, 12 percent of the 2007 poll respondents said it was excellent and 38 percent said good. Slightly more than a quarter-27 percent-said fair, and 23 percent said poor.

Roughly 390 readers participated in this week's poll, which was conducted June 3 and 4.

In your opinion, is Valeant’s acquisition of Bausch & Lomb likely to be good for B&L employees in the long run?
Yes: 27%
No: 73%

Are you optimistic or pessimistic about what Valeant’s acquisition of Bausch & Lomb will mean for the Rochester community?
Very optimistic: 2%
Somewhat optimistic: 22%
Somewhat pessimistic: 56%
Very pessimistic: 19%

On balance, has Warburg Pincus’ ownership of Bausch & Lomb been good for the company and its employees?
Yes: 65%
No: 35%

COMMENTS:

When corporate headquarters leave Rochester, well, you do the analysis: The Gannett Co. Inc., Global Crossing Ltd., Frontier Communications Corp., Xerox Corp., Paetec Holding Corp., Choice One Communications Inc. Did I miss some? Bausch & Lomb?
—Jeffrey Larson

Hey, maybe we can convince them to move their headquarters here!
—Joe Dattilo

Mergers and acquisitions have been the rule for almost 30 years and have made fortunes for a few but mostly created inefficient monopolies. We can only hope the local damage to Bausch & Lomb is minimal.
—Carlos Mercado

The one thing reported that makes me skeptical about the long-term viability is “research and development of new products will not be a major driver.” That isn’t very forward-thinking; that is short-term thinking, and we know where that got Kodak.
—David Wagner

“…Valeant will be the controlling party in the merger. Bausch & Lomb can expect major reductions in its sales, general and administrative cost structure, and research and development of new products will not be a major driver of the eye-care company’s future growth.” Does anyone remember … Case-Hoyt?
—Ron Mariano

Unfortunately, it was or should have been very obvious that Warburg Pincus was not in for the long term with Bausch & Lomb. They bought B&L with a plan to make it more valuable and then sell it. Bausch & Lomb senior management will be the most vulnerable.
—Dave Sliney

6/7/13 (c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.


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