Canadian drugmaker Valeant Pharmaceuticals International (NYSE:VRX) said on Monday it will buy eye care company Bausch & Lomb Holdings from private equity firm Warburg Pincus LLC for $8.7 billion in an all-cash deal.
According to the terms of the deal, Warburg Pincus, which leads an investment group that owns Bausch & Lomb, will receive $4.5 billion in cash, and $4.2 billion will be used to pay off Bausch & Lomb’s outstanding debt.
The acquisition of the Rochester, N.Y.-based company, which has been in the works on and off for years, will help Valeant to capitalize on "growing eye health trends driven by an aging patient population, an increased rate of diabetes and demand from emerging markets," a joint statement said.
Bausch & Lomb is Valeant's biggest acquisition and will place the Canadian firm among the world's 15 largest pharmaceutical companies, Valeant Chief Executive Michael Pearson told Reuters in an interview.
"This is a 160-year-old company and brand name. I think we'll be able to really leverage that," he said, adding that the deal will boost Valeant's 2013 earnings.
The deal also provides Valeant with the large scale of operations that it lacked in China and emerging markets like the Middle East, Pearson said.
The purchase is expected to close in the third quarter of this year, subject to closing conditions and regulatory approvals. The deal also heads off a planned initial public offering from Bausch & Lomb.
Valeant, which has been on an acquisition spree since 2010, has been pursuing deals that could give it strategic leverage in its ophthalmology and dermatology business. Quebec-based Valeant acquired two eye care companies last year, Eyetech Inc. and Visudyne.
Last month, it made an unsuccessful bid to buy generic drug maker Actavis Inc. (NYSE:ACT) in a more than $13 billion deal, Reuters reported, citing people familiar with the matter. Last Monday, Actavis said it will buy Warner Chilcott (NASDAQ:WCRX) in an all-stock deal worth about $5 billion.
Bausch & Lomb, which began as a small optics outlet in 1853, now has more than 12,000 employees worldwide in 100 countries, selling contact lenses, treatments for eye conditions and surgical instruments.
Bausch & Lomb will retain its name and its three divisions -- contact lenses, pharmaceuticals and surgical instruments -- while Valeant's ophthalmology arm will be integrated into Bausch & Lomb.
"I am confident that under their stewardship, the Bausch & Lomb brand will continue to stand for excellence and innovation in eye health," Brent Saunders, CEO of Bausch & Lomb, said in a statement. After the deal closes, Saunders and other senior Bausch & Lomb executives will join Valeant.
Valeant, which has a market capitalization of $25.66 billion, saw its stock soar 10 percent to C$95.52 on Monday and by 24 percent in the past two days in Toronto, following speculations over the deal.