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Global contact lens supplier Bausch + Lomb (BLCO +7%) is seeing significant gains today after FT.com reported that private equity firms TPG and Blackstone (BX) are mulling a joint bid for the company. This is not the first time news broke that BLCO had interested buyers. A month ago, FT.com wrote that BLCO was exploring a sale due to lender concerns over its separation from parent company Bausch Health (BHC), which carries a massive debt load on its books, around $20 bln. The news stirred up meaningful excitement in shares of BLCO, given the speculation over the sizeable premium buyers would likely have to shell out to ink a takeover deal.

With today's news noting that two firms, TPG and BX, have emerged as the leading buyers following last month's report, BLCO investors are teeming with excitement over the potentially lucrative takeover deal that may be in the works.

• BLCO's enterprise value -- its combined market cap and debt -- stands at $11.45 bln as of Friday's close, making a possible price tag on acquiring the company relatively high. With shares gapping nicely higher today, investors anticipate a juicy premium -- closer to a $12.0 bln offer. However, FT.com commented that sources speculate the price could fetch up to $14.0 bln, a roughly +28% premium to Friday's closing price.
• The premium would be well-warranted. Since BHC spun off its eye care division last year, BLCO has delivered improving quarterly results, recently registering its third straight quarter of at least +17% revenue growth on top of sustained profitability. The company's roadmap anticipates further growth. BLCO is entering Phase 2 of its growth strategy, focusing on new product launches, which it expects will spark a flurry of activity during 2H24 and into 2025.
• Regarding product launches, BLCO received uplifting news today as the FDA approved the company's enVista Envy full range of vision intraocular lenses. The FDA's approval followed Health Canada's approval in May. The approval represents a meaningful step toward bolstering BLCO's presence in the high-margin premium intraocular lens space.

While nothing has been confirmed, the likelihood of a takeover appears high, given the financial worries surrounding BHC, which owns just under 90% of BLCO. BHC is also amid legal challenges with Teva Pharma (TEVA) over the patent behind its lead drug, Xifaxan. Additionally, BHC has around $9.0 bln worth of maturities due around the same time the company loses exclusivity on Xifaxan on January 1, 2028. This development is stoking solvency worries among investors, making it critical that BHC raise cash to continue funding its pipeline. Reaching a deal for BLCO would be an excellent start.