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Private equity groups TPG and Blackstone have teamed up to work on a joint bid for eyecare company Bausch + Lomb, according to people familiar with the matter. 

If it goes through, the deal could be one of the largest private equity buyouts of the year, with Bausch Lomb’s enterprise value including debt totalling $11.5bn as of market close on Friday. Several other private equity funds assessing bids have dropped out of the process.

Bausch + Lomb was put up for sale to resolve an impasse over a separation from its heavily indebted parent company.

TPG and Blackstone have long been considered the frontrunners to take the business private, as before Bausch + Lomb publicly listed in 2022 the private equity groups had expressed interest in buying the business, the people added. TPG already owns ophthalmology company BVI Medical.

People familiar with the bidding said offers were expected to value the company at an enterprise value of between $13bn and $14bn, or up to $25 per share.

Bausch + Lomb shares closed 7.2 per cent higher in New York on Monday following the Financial Times’ report of the potential private equity takeover. The group’s share price finished 0.6 per cent shy of its July 2023 peak and is now up by more than one-third in value since the FT reported last month that the eyecare group had kicked off a sale process led by advisers at Goldman Sachs.

The dealmaking effort is an attempt to resolve a feud between shareholders and creditors of Bausch Lomb’s parent company Bausch Health, which owns 88 per cent of the company. Bausch Lomb’s chief executive and chair is famed dealmaker Brent Saunders, who sold Allergan to AbbVie for $63bn in 2020.

Formal bids are expected by as early as the end of the month. However, it was still possible that a deal may not occur, the people said.

Blackstone, TPG and Bausch + Lomb declined to comment. Goldman did not immediately respond.

A spin-off process ground to a halt, as losing its more profitable subsidiary threatened to leave Bausch Health insolvent because of a $21bn debt pile, and was opposed by lenders, including Apollo Management, Elliott Management, GoldenTree Asset Management and Silver Point Capital.

Bonds in Bausch Health have also traded strongly, as a sale would allow the company, formerly known as Valeant, to pay down its debts. 

Bausch Health has about $10bn worth of maturities coming due before the end of 2027 — with the highest priority being a $2.4bn fixed-rate loan due next year. How Bausch Health’s key shareholders — including Wall Street titans Carl Icahn and John Paulson — would spend the proceeds of the sale is unclear. But one idea under discussion is to pay themselves a special dividend after paying down the near-term debt, according to two people. But this move would be likely to rankle creditors. 

Representatives for Icahn declined to comment, while Paulson & Co did not immediately respond to a request for comment.

Bausch + Lomb is projected to generate nearly $860mn in adjusted earnings before interest, taxation, depreciation and amortisation from $4.7bn in revenues this year, nearly three-fifths of which comes from sales of contact lenses and dry eye drugs Xiidra and Miebo. The company also sells surgical equipment to ophthalmologists.

Doubts over Bausch Health’s performance and solvency have been added to by its lead drug Xifaxan, a gastrointestinal medication, coming off patent by 2029. Bausch Health’s market value has risen by nearly 26 per cent to just under $2.9bn since the sale process was first reported but remains well below its value before the company faced legal challenges over its Xifaxan patents.

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

China has sent its largest ever daily deployment of warplanes into airspace close to Taiwan as part of a wider military exercise, confirming fears that Beijing would ratchet up tensions days after Taiwanese President Lai Ching-te asserted his country’s sovereignty.

The People’s Liberation Army said its forces practised “combat readiness patrols, blockade of key ports and areas, assault on maritime and ground targets and seizure of comprehensive superiority”, calling the drills “a stern warning to the separatist acts of ‘Taiwan Independence’ forces”.

Taiwan said 125 military aircraft were deployed in the PLA exercise on Monday.

The US said it was “seriously concerned” by the drills and condemned Beijing for threatening regional stability. China’s “response with military provocations to a routine annual speech is unwarranted and risks escalation”, said state department spokesperson Matthew Miller.

The EU said China’s military activities further increased cross-strait tensions and called on “all parties” to exercise restraint.

Lai’s office called on China to end military provocations and stop threatening Taiwan.

“There is a broad consensus among the international community on the importance of maintaining peace and stability in the Taiwan Strait and the Indo-Pacific region,” Lai’s office said. “China should face the reality of the existence of the Republic of China (Taiwan) and respect the Taiwanese people’s choice of a democratic and free way of life.”

The PLA exercises followed a National Day speech by Lai last Thursday in which he asserted Taiwan’s sovereignty but also appealed to China to work with him for peace. He also highlighted the 1911 uprising that overthrew Chinese imperial rule as part of Taiwan’s history, in an overture to those Taiwanese who embrace a Chinese identity.

Aides of Lai described his speech as a gesture of goodwill towards Beijing, while foreign observers viewed it as restrained and moderate.

“There were times Beijing reciprocated Taipei’s restraint. This could have been one of them. But they’re choosing a different path,” Rush Doshi, who worked on China affairs in US President Joe Biden’s National Security Council until earlier this year, posted on X on Monday.

Beijing has denounced Lai, who was elected in January, as a “dangerous separatist” and sharply stepped up manoeuvres near Taiwanese waters and airspace since he took office. China claims Taiwan as part of its territory and threatens to annex it by force if Taipei refuses to submit under its control indefinitely.

Lai’s predecessor Tsai Ing-wen used a visit to Europe — which China has also opposed — to call for the EU to stand firm in its support of Taiwan.

“Taiwan’s democracy, similar to European democracies, was built on the sacrifices of those who fought against dictatorship,” she told a conference in Prague hours after Beijing started its drills. Tsai said she was making her first visit to Prague to see “friends who are not afraid of intimidation”.

The PLA called its drills “Joint Sword 2024 B”, framing them as a sequel to manoeuvres organised three days after Lai’s inauguration in May.

The PLA said its aircraft carrier Liaoning participated in the exercise in waters east of Taiwan to practise “vessel-aircraft co-operation, joint air control, and strikes on maritime and ground targets”.

Beijing regularly uses military manoeuvres, and propaganda about them, to try to intimidate the Taiwanese public and put a strain on the island’s armed forces.

In most past drills that China framed as responses to events in Taiwan, the PLA introduced some new operational patterns, which it then continued to use. Taiwanese and western military officials have said this has eroded the fragile status quo between the two sides.

Taiwanese officials said they did not detect such new operational steps on Monday. Moreover, the PLA declared the drill “successfully completed” on Monday night, making it shorter than previous ones. But “indeed this time with their operations both on our western and eastern sides, they are creating a certain pressure on us,” said Lieutenant-General Hsieh Jih-sheng, deputy chief of the general intelligence staff of Taiwan’s armed forces.

Taiwan’s defence ministry said 90 of the PLA warplanes participating in the drills entered Taiwan’s self-declared early-warning zone, also by far the most ever spotted in a single day. Seventeen Chinese warships and 17 vessels from the Chinese coastguard, which helps assert Beijing’s expansive territorial claims and is part of the military command chain, also operated around Taiwan and its outlying islands, it added.

Monday’s coastguard component was larger than in the May exercises, which involved the coastguard for the first time.

The China Coast Guard said it would practise boarding and inspection of ships in waters of Taiwan-controlled islands off the Chinese coast, but Taiwan said no vessels were boarded.

If Beijing were to attempt boarding and inspection in Taiwanese waters or anywhere on its side of the Taiwan Strait, “we would use every possible means to prevent that”, said Hsieh Ching-chin, deputy director-general of Taiwan’s Coast Guard Administration, adding such moves would be a violation of international law.

Additional reporting by Steff Chávez in Washington and Raphael Minder in Warsaw

Academy of Sciences permanent secretary Hans Ellegren (C), Jakob Svensson (L) and Jan Teorell, of the Nobel assembly at the Swedish Riksbank announces the Swedish Riksbank’s prize in economic science in memory of Alfred Nobel 2024, which goes to Daron Acemoglu, Simon Johnson and James A Robinson, during a press meeting at the Royal Swedish Academy of Sciences in Stockholm, Sweden, on Monday. Photo by Christine Olsson/EPA-EFE

The Committee for the Prize in Economic Sciences said the three demonstrated “the importance of societal institutions for a country’s prosperity.”

“Societies with a poor rule of law and institutions that exploit the population do not generate growth or change for the better,” it said.

The committee said the European colonization around much of the globe played a role in the wealth of societies because of the institutions they put in place.

“This was sometimes dramatic, but did not occur in the same way everywhere,” the committee said. “In some places, the aim was to exploit the indigenous population and extract resources for the colonizers’ benefit. In others, the colonizers formed inclusive political and economic institutions for the long-term benefit of European migrants.

“Inclusive institutions were often introduced in countries that were poor when they colonized, over time resulting in a generally prosperous population. This is an important reason why former colonies that were once rich are now poor and vice versa.”

The economic situation in colonies often led to political change when poor conditions led to a revolt from the Indigenous people or paved the way to a democratic system of government that ushered out colonial rulers.

“Reducing the vast differences in income between countries is one of our time’s greatest challenges,” Jakob Svensson, chair of the committee said. “The laureates have demonstrated the importance of societal institutions for achieving this.”