Posted at: 07/26/2013 11:31 AM
Updated at: 07/26/2013 6:10 PM
I-Team10 is tracking what's happening with Bausch and Lomb and its employees as we get closer to the completed sale of B&L. When the CEO of the company buying B&L told investors he wants "$800 million in cost synergies," the stock price soared.
The name of the company buying Bausch and Lomb is called Valeant. Its CEO, J. Michael Pearson, said in a conference call with investors that Valeant "expect(s) to realize at least $800 million in cost synergies by the end of 2014."
Brean: How do you interpret that?
Mark Peterson, Gr. Rochester Enterprise: Well to get to $800 million in cost savings, there is no way to do that without significant personnel changes.
Synergies is Wall Street jargon for eliminating jobs and functions that a company (Valeant) buying another company (B&L) already does.
The day of the conference call, Valeant's stock price rose to $91.80. That was a jump from $74.67 just five days earlier.
I-Team10 is tracking the sale of B&L closely because we've been hearing about plans for massive layoffs at B&L since last week.
Greater Rochester Enterprise, an organization that tried to attract new business and employees to the Rochester area, is putting a plan together to handle more than 1,000 layoffs from B&L.
We spoke to GRE CEO Mark Peterson yesterday.
Brean: So your planning right now to deal with roughly 1,000 laid off employees from Bausch and Lomb?
Mark Peterson, Greater Rochester Enterprise: We are. The exact number will come to fruition over time.
Maggie Brooks reacts
Maggie Brooks, Monroe County Executive: Well we have been having conversations with the company.
Brean: But did you know about GREs plan to handle all these layoffs?
Brooks: We were unaware of the number.
Brooks says as a practice her staff and agencies are always preparing for what could happen to employees of any company when their company is bought out.
"Where do they go? " she asked. "We have a responsibility as a community, whether rumor or not, to make sure we're prepared in the event that that happens."
Brooks says she's had conversations with Valeant.
Brean: In your conversations with Valeant, did they ever tell you that layoffs were imminent?
Brooks: No. They have not.
Brean: Do you think the company owes it to someone like you or the mayor to at least let you know what they're planning to do with employees?
Brooks: Yeah, I have to admit, hearing that number broadcast took me back a little bit. I think the company does have a responsibility but at the same time they're a private company that has a responsibility to sustain itself into the future.
In the May 28th conference call -- the Valeant CEO Pearson said B&L operates like a "big pharmacy company" and he said he plans on changing that. Here's what he says about the difference in overhead costs between Valeant and B&L.
He refers to overhead as "SG&A."
"We've been able to sustain our strong organic growth spending about 20% on SG&A and I think Bausch is more in the low 40s," Pearson said. "So we believe there is significant space there."
SG&A stands for selling, general and administrative. It's basic overhead like buildings and employees.
"Remember, Rochester is B&L's headquarters," financial analyst George Conboy said. Some of his clients are B&L employees.
"Therefore, when you have a headquarters staff it's reasonable to expect that a lot of management overhead, oversight, administration, finance and what have you, are located at a company headquarters. So the bulk of the cuts we're going to see are likely to happen right here in Rochester."
"So what kind of impact does that have on our community?" I asked.
"The only thing we have going for us that makes Rochester a little better community is, it's a very diverse employment base, very high tech employment base, a lot of growing companies are likely to want to hire people that come out of B&L. As a community overall, in the long run, shouldn't have that big an impact but at the individual level, it's a tragedy," Conboy said.
Bausch and Lomb directed our calls to Valeant. We got this statement from Valeant's spokeswoman, Laurie Little. "I know there many rumors floating around but we do not comment on rumors.
As for employees, we are still in the integration planning stage and we plan to communicate with employees first once those plans have been firmed up."