In Invasion of the Body Snatchers, the Pod People came and snatched people out of the blue, replacing familiar loved ones with emotionless drones. Though the Pod People were fictional, there's been no shortage of similar snatching on the equity markets, as public companies continue to disappear.
Today, news broke that eye-care specialist Bausch & Lomb (NYSE:BOL) may soon surrender its ticker symbol and go private. The snatcher: Warburg Pincus, which earlier this year participated in the completion of the multibillion-dollar purchase of services firm ARAMARK.
The proposal has Warburg paying roughly $3.7 billion, in addition to assuming $830 million of debt. For shareholders, the buyout would mean $65 per share, a 26% premium to the volume-weighted average price of the stock over the past 30 days, according to Bausch & Lomb.
Nonetheless, investors are looking for more.
As I write this, shares of Bausch & Lomb trade at $66.64, implying that some believe another party will step up during the 50-day "go shop" period written into the buyout agreement. While this is certainly possible, it doesn't quite seem likely. The recent rash of private equity action has seen precious little competition between firms once a deal gets announced. There's nothing underhanded about the process, mind you -- much of the bidding simply goes on behind closed doors, before any public announcements have been made.
Still, it's also possible that another strategic buyer might step in and outbid Warburg. When Blackstone was making its run at Equity Office Properties, competition from Vornado Realty Trust (NYSE:VNO) heated things up. Investors apparently hope that a strategic buyer could rationalize a higher price for the company, thanks to that magic word, "synergy."
The acquisition's not cheap for Warburg. Even overlooking Bausch & Lomb's lousy 2006 -- marred by a high-profile product recall -- the $65-per-share offer is an eye-popping 30 times expected 2007 earnings per share, and 22 times 2008 estimates. That's a steep price for a company that has grown its revenue an average of 6.6% per year over the last five years.
I certainly can't blame investors for trying to squeeze as much as they can out of Bausch & Lomb before it disappears from their portfolios, but I can't help noting that this looks like a pretty healthy offer for a company that's been less than healthy lately.
Fool on!
Fool contributor Matt Koppenheffer may need a new contact prescription if deal valuations continue to rise. He does not own shares of any of the companies mentioned. The Fool's disclosure policy isn't a public company, but if it were, it'd go private -- it's just so chic right now.
