Merck & Co. Chief Executive Officer Kenneth Frazier said the drugmaker may be interested in buying Bausch & Lomb, the eye-care company for sale by Warburg Pincus LLC for at least $10 billion.
“It’s something that’s worth thinking about, that’s the most I can say,” Frazier said in an interview yesterday at the JPMorgan Chase & Co. health conference in San Francisco.
Warburg, working with Goldman Sachs Group Inc., is giving interested parties access to its financial data and seeking first-round bids by month’s end, said people with knowledge of the matter, who asked not to be named because the process is private. Warburg is seeking at least $10 billion for the business, these people said. Goldman Sachs contacted some prospective bidders including Merck before Christmas with information about Bausch & Lomb, said one of the people.
Frazier has said that he’s happy with Merck’s diversified business model, which includes animal health and consumer health units. Abbott Laboratories (ABT) and Pfizer Inc. (PFE) have spun off units to make themselves more specialized. Pfizer is divesting its animal health and nutrition businesses, while Abbott split to create AbbVie Inc. (ABBV), a drug company.
Before his Bausch & Lomb comments yesterday, Frazier said the Whitehouse Station, New Jersey-based company isn’t interested in a large drug acquisition, preferring to focus on smaller, early-stage deals rather than large combinations.
“I don’t see us looking for another large combination,” Frazier said. “The conclusion we’ve reached at Merck is that the sweet spots are really in the early stage.”
Merck shares rose less than 1 percent to $42.18 at the close of New York trading.
The drugmaker has been cutting thousands of jobs and trying to boost demand of existing products to offset the loss of asthma treatment Singulair, which began facing competition from cheaper generic copycats in August. Merck has five major products in development that the company is focusing on over the next year. Investors are concerned about Merck’s research operations after the company halted a study of its experimental blood thinner vorapaxar, said Tony Butler, an analyst with Barclays Plc.
Frazier said on Jan. 3 that the company’s consumer unit was small relative to the rest of Merck, though it was growing. “The consumer business is a business that frankly is not quite at the scale of the animal health business, and for us it’s something that we have to consistently look at and evaluate as to how it can be a meaningful contributor.”
Bausch & Lomb’s eye-care products, which include contact lens fluid as well as generic drugs, would expand those lines.
Other parties considering bids and receiving confidential financial information on Bausch & Lomb include New York-based Pfizer, New Brunswick, New Jersey-based Johnson & Johnson (JNJ), the world’s biggest seller of health products, Abbott and Paris- based Sanofi (SAN), according to the people with knowledge of the matter.
Representatives at Bausch & Lomb, Warburg, Goldman Sachs, Abbott, Sanofi, Pfizer and J&J have declined to comment on the process. Warburg took Bausch & Lomb private in 2007 in a deal valued at $4.6 billion, including debt.
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