Bausch & Lomb Inc., a maker of contact lenses and eye medicines, on Tuesday disclosed plans to acquire about 70 percent of Chinese eye drug company Shandong Chia Tai Freda Pharmaceutical Group from Sino Biopharmaceutical Ltd. and two other firms.
Under the deal, Bausch & Lomb has agreed to pay Sino $200 million in cash for a 55 percent stake in Shandong. The company said the purchase price equals 18.6 times Shandong's 2004 earnings — about $10.8 million. The company said it will also purchase a 15 percent stake in Shandong for $54.5 million from two other groups.
The news sent Bausch & Lomb's stock surging during morning trading on the New York Stock Exchange. Shares hit a low of $57 in October, but are up about 30 percent so far this year.
China-based Shandong employs 1,300 workers to develop and manufacture medications to treat ocular inflammation and infection, glaucoma and dry eye. In 2004, the firm had sales of $62 million and has seen compound annual growth of more than 20 percent, Bausch & Lomb said.
The acquisition is expected to be neutral to 2005 earnings, but will boost 2006 profit by 5 cents to 10 cents per share and 2007 income by 10 cents to 15 cents, the company added.
On average, analysts surveyed by Thomson Financial currently forecast Bausch & Lomb's 2005 earnings at $3.48 per share, 2006 earnings at $4.02 per share and 2007 income of $4.50 per share. The company earned $2.92 per share in 2004.
Bausch & Lomb added that the deal should close in the third quarter, pending final approval from Sino shareholders.