AlphaSituations-Event/Catalyst Driven Research, AlphaSituations

Robert Sassoon

AlphaSituations-Event/Catalyst Driven Research

AlphaSituations

Since its establishment, AlphaSituations has delivered a track record of outperformance with a hit rate of winners of more than 70% of its portfolio of ideas generating annualized average returns of 20%. In January 2022, AlphaSituations was contracted by Water Tower Research, an investor engagement and stakeholder communication platform to provide coverage of Special Situations

Event-Driven

<a href="https://www.smartkarma.com/entities/bausch-health-companies-inc" target="_blank" data-smartkarma-citation="entities:941:1" rel="noopener">Bausch Health Companies (BHC US)</a> recently announced that it intends to split-off via an IPO  its highly profitable and fast growing  medical aesthetics business, Solta Medical, adding to the proposed spin/split-off of its eyecare business, Bausch &amp; Lomb (B&amp;L , which it announced a year ago. At the same time, BHC continues to make progress  in reducing its large debt pile, the legacy of the company's aggressive expansion during the first half of the last decade under the aegis of the management team. Although the share price has climbed ~60% since we published in August 2020 our insight - SpinTalk: Why Bausch Health Companies' Planned Eye Care Spin-Off Promises a Major Value Re-Rating -  the BHC share price appears to have hit a value wall in recent months and has so far struggled to make a sustainable breakthrough the $30 barrier. Indeed since our last update,  ActivistTalk: Why We Think There Is Even More Value In Bausch Health Companies Pending Restructuring, published on March 18, 2021, BHC has lost ~12% of its value  vs a ~9% drop in the <a href="https://www.smartkarma.com/entities/spdr-s-p-pharmaceuticals-etf" target="_blank" data-smartkarma-citation="entities:32128:1" rel="noopener">SPDR S&amp;P Pharmaceuticals ETF (XPH US)</a> while the broader market as represented by the <a href="https://www.smartkarma.com/entities/spdr-s-p-500-etf-trust" target="_blank" data-smartkarma-citation="entities:763:1" rel="noopener">SPDR S&amp;P 500 (SPY US)</a> has risen ~14%.Our insight below discusses why BHC's share price momentum has stalled in recent months and why we believe this represents an opportunity to pick up the considerable value still left on the table.

Bausch Health Companies (BHC US) recently announced that it intends to split-off via an IPO  its highly profitable and fast growing  medical aesthetics business, Solta Medical, adding to the proposed spin/split-off of its eyecare business, Bausch &amp; Lomb (B&amp;L , which it announced a year ago. At the same time, BHC continues to make progress  in reducing its large debt pile, the legacy of the company's aggressive expansion during the first half of the last decade under the aegis of the management team. Although the share price has climbed ~60% since we published in August 2020 our insight - SpinTalk: Why Bausch Health Companies' Planned Eye Care Spin-Off Promises a Major Value Re-Rating -  the BHC share price appears to have hit a value wall in recent months and has so far struggled to make a sustainable breakthrough the $30 barrier. Indeed since our last update,  ActivistTalk: Why We Think There Is Even More Value In Bausch Health Companies Pending Restructuring, published on March 18, 2021, BHC has lost ~12% of its value  vs a ~9% drop in the SPDR S&amp;P Pharmaceuticals ETF (XPH US) while the broader market as represented by the SPDR S&amp;P 500 (SPY US) has risen ~14%.Our insight below discusses why BHC's share price momentum has stalled in recent months and why we believe this represents an opportunity to pick up the considerable value still left on the table.

SpinTalk:Bausch Health Companies- Restructuring Broadens,Considerable Value Still Left On The Table

On August 16, 2020, we published an insight looking into the potential impact of  the decision by <a href="https://www.smartkarma.com/entities/bausch-health-companies-inc" target="_blank" data-smartkarma-citation="entities:941:1" rel="noopener">Bausch Health Companies (BHC US)</a> to spin off its largest revenue generator, the Eye Health business (Bausch &amp; Lomb), into an independent publicly traded entity. Although details behind the proposed transaction at the time were sparse, our initial assessment was that the proposed corporate restructuring event along with the company's debt reduction efforts  promised to be a substantiallly value creating one. For further details,  please refer to the insight - <a href="SpinTalk:%20Why%20Bausch%20Health%20Companies'%20Planned%20Eye%20Care%20Spin-Off%20Promises%20a%20Major%20Value%20Re-Rating.%20Read%20more:%20https://skr.ma/fpJFD" target="_blank" rel="noopener">SpinTalk: Why Bausch Health Companies' Planned Eye Care Spin-Off Promises a Major Value Re-Rating.</a> 
Since then, BHC has indeed enjoyed a major elevation in its share price, up by more than 90% from the published share price (i.e., $17.48)  in our insight,  bringing it to trade in our then assessed target range of $28-$34, at $33.43. However, there have been further developments since the publication of that insight, notably the ramping up of interest from activists. This has encouraged us to revisit the situation and to review our initial valuation thesis.
Our conclusion is that there is likely to be substantially more value in the BHC's restructuring than we had initially assessed.

On August 16, 2020, we published an insight looking into the potential impact of  the decision by Bausch Health Companies (BHC US) to spin off its largest revenue generator, the Eye Health business (Bausch &amp; Lomb), into an independent publicly traded entity. Although details behind the proposed transaction at the time were sparse, our initial assessment was that the proposed corporate restructuring event along with the company's debt reduction efforts  promised to be a substantiallly value creating one. For further details,  please refer to the insight - SpinTalk: Why Bausch Health Companies' Planned Eye Care Spin-Off Promises a Major Value Re-Rating. 
Since then, BHC has indeed enjoyed a major elevation in its share price, up by more than 90% from the published share price (i.e., $17.48)  in our insight,  bringing it to trade in our then assessed target range of $28-$34, at $33.43. However, there have been further developments since the publication of that insight, notably the ramping up of interest from activists. This has encouraged us to revisit the situation and to review our initial valuation thesis.
Our conclusion is that there is likely to be substantially more value in the BHC's restructuring than we had initially assessed.

ActivistTalk: Why We Think There Is Even More Value In Bausch Health Companies Pending Restructuring

Founder

Kemp Dolliver, CFA

Cherrystone Hill Research

Equity Capital Markets

HBM Holdings Limited / Equity Capital Markets

Pre-revenue biotechnology company Harbour Biomed looks to raise US$230 million in an IPO on the HKEX. Because of the short timetable for the offering, the analysis in this Insight will be shorter than normal. We think that the proposed pre-money valuation of US$950 -1,043MM is fair, and the company has rich newsflow and numerous catalysts ahead in 2021/22. We would take the deal.

Pre-revenue biotechnology company Harbour Biomed looks to raise US$230 million in an IPO on the HKEX. Because of the short timetable for the offering, the analysis in this Insight will be shorter than normal. We think that the proposed pre-money valuation of US$950 -1,043MM is fair, and the company has rich newsflow and numerous catalysts ahead in 2021/22. We would take the deal.

Harbour Biomed IPO: Positive Thoughts in Brief

Having fallen into heavy debt as a result of an aggressive acquisition strategy and an accounting scandal under the stewardship of the previous, discredited management team, the current management team has made great strides in restoring a semblance of stability to <a href="https://www.smartkarma.com/entities/bausch-health-cos-inc" target="_blank" data-smartkarma-citation="entities:941:1" rel="noopener">Bausch Health Companies (BHC US)</a> , formerly known as Valeant Pharmaceutuicals International, since taking over the reins in 2016. While the company's debt remains over extended, the company's restructured businesses give it the capacity to continue to make progress in bringing down its debt burden towards more acceptable levels. This has gained little recognition with the BHC stock price continuing to trade at a significant discount to peers.We believe the biggest motivation behind pursuing the spin-off of the eye health business is to unlock significant latent value in the Bausch+Lomb eye health unit. Peers such as Alcon (ALC US) and The Cooper Companies (COO US) are current trading at EBITDA multiples three times greater than <a href="https://www.smartkarma.com/entities/bausch-health-cos-inc" target="_blank" data-smartkarma-citation="entities:941:1" rel="noopener">Bausch Health Companies (BHC US)</a>. Because this process has only just begun, details about the proposed separation of businesses are very sketchy at this time. However, below we attempt a first stab at assessing the valuation impact of the proposed transaction. Our preliminary SOTP analysis is that the transaction could represent a catalyst to  a ~60%-95% value re-rating on a pre-spin basis, with the prospect of even greater value upside sould the overall net debt level continue to decline as targeted by management.

Having fallen into heavy debt as a result of an aggressive acquisition strategy and an accounting scandal under the stewardship of the previous, discredited management team, the current management team has made great strides in restoring a semblance of stability to Bausch Health Companies (BHC US) , formerly known as Valeant Pharmaceutuicals International, since taking over the reins in 2016. While the company's debt remains over extended, the company's restructured businesses give it the capacity to continue to make progress in bringing down its debt burden towards more acceptable levels. This has gained little recognition with the BHC stock price continuing to trade at a significant discount to peers.We believe the biggest motivation behind pursuing the spin-off of the eye health business is to unlock significant latent value in the Bausch+Lomb eye health unit. Peers such as Alcon (ALC US) and The Cooper Companies (COO US) are current trading at EBITDA multiples three times greater than Bausch Health Companies (BHC US). Because this process has only just begun, details about the proposed separation of businesses are very sketchy at this time. However, below we attempt a first stab at assessing the valuation impact of the proposed transaction. Our preliminary SOTP analysis is that the transaction could represent a catalyst to  a ~60%-95% value re-rating on a pre-spin basis, with the prospect of even greater value upside sould the overall net debt level continue to decline as targeted by management.

SpinTalk: Why Bausch Health Companies' Planned Eye Care Spin-Off Promises a Major Value Re-Rating

Healthcare Specialist

Winnie Wong

Equity Bottom-Up

The Securities and Exchange Commission (SEC) believes that insider trading occurred around <a href="https://www.smartkarma.com/entities/4564" target="_blank" data-smartkarma-citation="entities:4564:1">Sanofi (SAN FP)</a> 's $11.6 billion deal for <a href="https://www.smartkarma.com/entities/26434" target="_blank" data-smartkarma-citation="entities:26434:1">Bioverativ Inc (BIVV US)</a> .  Last Friday, <a href="https://www.sec.gov/litigation/litreleases/2018/lr24035.htm" target="_blank">SEC filed a lawsuit</a> in the US District Court for the Southern District of New York against “unknown traders” who made “a series of suspicious transactions” surrounding the announcement of a definitive agreement under which Sanofi will acquire Bioverativ".The regulator believes that the traders allegedly used foreign broker…

The Securities and Exchange Commission (SEC) believes that insider trading occurred around Sanofi (SAN FP) 's $11.6 billion deal for Bioverativ Inc (BIVV US) .  Last Friday, SEC filed a lawsuit in the US District Court for the Southern District of New York against “unknown traders” who made “a series of suspicious transactions” surrounding the announcement of a definitive agreement under which Sanofi will acquire Bioverativ".The regulator believes that the traders allegedly used foreign broker…

Insider Trading Alleged as Sanofi Continues Its Shopping Spree

Canada

Bausch Health Companies Inc. discovers and distributes pharmaceutical. The Company develops drugs for unmet medical needs in central nervous system disorders, eye health, and gastrointestinal diseases, as well as contact lenses, intraocular lenses, ophthalmic surgical equipment, and aesthetic devices. Bausch Health Companies serves customers worldwide.

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Bausch Health Companies (BHC US)

SpinTalk:Bausch Health Companies- Restructuring Broadens,Considerable Value Still Left On The Table

Although the share price has climbed ~60% since we published our first insight on this corporate restructuring event, the BHC share price has lost...

Robert Sassoon

ActivistTalk: Why We Think There Is Even More Value In Bausch Health Companies Pending Restructuring

As BHC continues to prepare for the separation of its businesses, there is substantially more value here than we had intially assessed soonafter...

Robert Sassoon

Harbour Biomed IPO: Positive Thoughts in Brief

This Insight includes a brief analysis of Harbour Biomed and its proposed listing on the HKEX. We like the deal at the price range offered.

Kemp Dolliver, CFA

SpinTalk: Why Bausch Health Companies' Planned Eye Care Spin-Off Promises a Major Value Re-Rating

Having fallen into heavy debt as a result of an aggressive acquisition strategy and an accounting scandal under the stewardship of the previous,...

Robert Sassoon

Insider Trading Alleged as Sanofi Continues Its Shopping Spree

The Securities and Exchange Commission (SEC) believes that insider trading occurred around Sanofi (SAN FP) 's $11.6 billion deal for Bioverativ Inc...

Winnie Wong

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