Warburg Pincus LLC would reap about a threefold return on its $1.7 billion equity investment in Bausch & Lomb Inc. if talks to sell the eye-care company for $9 billion bear fruit, a person with knowledge of the matter said.
The private-equity firm, based in New York, is close to a deal to sell the company it bought six years ago to Valeant Pharmaceuticals International Inc., Canada’s largest drugmaker, according to a second person briefed on the situation.
Warburg invested about $1.7 billion in a 2007 going-private transaction valued at $4.6 billion, including debt, the first person said. Bausch & Lomb, based in Rochester, New York, makes contact lenses, eye-care solutions and prescription medicines.
A sale at $9 billion, including debt, would give the investment firm a total return of more than $4.9 billion, according to data compiled by Bloomberg. That includes $673 million Warburg collected from a dividend in March. Bausch & Lomb filed for an initial public offering in March after an earlier effort to sell the company for at least $10 billion stalled, people familiar with the matter said at the time.
Jeffrey Smith, a Warburg Pincus spokesman, and Laurie Little, a spokeswoman for Valeant, declined to comment on a possible transaction.
Warburg, which has more than $30 billion in assets, is also exploring possible sale of department-store chain Neiman Marcus, which it co-owns with another buyout firm, TPG Capital, Bloomberg News reported earlier this month, citing people familiar with the matter. It completed raising an $11.2 billion fund, the 46-year-old firm’s 11th buyout vehicle, this month.
Warburg is run by co-Presidents Joseph P. Landy and Charles R. Kaye. Sean D. Carney, a managing director, is leading the Bausch & Lomb sale, one of the people said.
Valeant is seeking to make acquisitions of companies with solid cash flows in high-growth areas, Chief Executive Officer Mike Pearson said in a conference call with investors earlier this month. Valeant was said in April to be in talks to merge with Parsippany, New Jersey-based Actavis Inc., the largest U.S. generic-drug maker, according to people familiar with the matter.
A $9 billion deal for Bausch & Lomb would be the largest of 15 acquisitions for Montreal-based Valeant since it was created in a 2010 merger of its U.S. predecessor and Canada’s Biovail Corp.
The price would be about 21 times Bausch & Lomb’s earnings before interest, taxes, depreciation and amortization of $429.5 million in the year through December, according to data compiled by Bloomberg.
Bausch & Lomb reported adjusted Ebitda of $643.1 million for the period, excluding costs from stock-based compensation and recent acquisitions. The buyout values the company at 14 times those adjusted earnings, data compiled by Bloomberg show.
Warburg Pincus invests globally in energy, financial services, health care, technology, media and telecommunications, and consumer, industrial and services companies. The firm distributed about $6.2 billion to investors in 2012 and an additional $3 billion in the first quarter.