Bausch Health Companies Inc. (BHC, Financial) ("Bausch Health")
In early August 2020, Bausch Health announced that it is planning to spin off its eye care business, Bausch + Lomb, into an independent publicly traded company. This will allow the company to concentrate on its gastroenterology, aesthetics/dermatology, neurology and international pharma business.
Chairman and CEO Joseph Papa said, "We've looked at the value of our pure health companies like Alcon and Cooper and believe that Bausch + Lomb would compare very favorably when investors have an opportunity to make a judgment about the relative value of the stand-alone business".
Comparable companies like Cooper Companies and Alcon Inc. are currently trading between 18 and 20 times 2022 EBITDA estimates and 25-30 times trailing EBITDA estimates. If Bausch + Lomb trades at similar multiples as a stand-alone company, the total value of Bausch Health using a sum-of-the-parts method would be worth north of US$45 per share (net of debt). We felt that Bausch was undervalued for a long time, but investors were not giving credit that management has done a good job in running the operations, selling non-core assets, as well as de-leveraging its balance sheet. They felt the process was too slow. We hope the spin-off of Bausch + Lomb unit will be the much-needed catalyst for investors to price the company closer to its intrinsic value.
From Francis Chou (Trades, Portfolio)'s Chou Associates Fund 2020 annual letter.
