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Canadian pharmaceutical company Valeant announced Monday a deal to acquire US eye health company Bausch & Lomb for $8.7 billion in cash, becoming a behemoth in the burgeoning eye care sector.
The acquisition, which had been rumored, positions Valeant to capitalize on "growing eye health trends driven by an aging patient population, an increased rate of diabetes and demand from emerging markets," said a joint statement.
The merger also gives Valeant access to Bausch & Lomb's large portfolio of products and "a late stage pipeline of innovative, new products."
"With this transaction, Valeant will be a worldwide leader in both dermatology and eye health," Valeant's chief executive Michael Pearson summarized.
Founded in 1853, privately held Bausch & Lomb, based in Rochester, New York, is best known for its contact lenses and for products related to maintaining contact lenses, such as PureVision, Optima and ReNu.
The company also manufactures eye drops for treating eye dryness, glaucoma or allergies and materials used in eye surgery.
The purchase of Bausch & Lomb by Valeant Pharmaceuticals International, Inc. follows a series of some 15 recent acquisitions by the Canadian company over the last year totaling $3.5 billion.
But Bausch & Lomb is a far bigger target, enabling the Canadian firm to double its revenues in one fell swoop.
The US company, which employs 11,200 worldwide, last year reported revenues of around $3 billion, according to a filing with US securities regulators. Valeant reported revenues of $3.3 billion and had about 7,000 employees at the end of 2012.
Both companies had losses for 2012, with Bausch & Lomb reporting a loss of $68.3 million and Valeant a loss of $116 million.
The potential Bausch & Lomb deal comes on the heels of Valeant's reportedly unsuccessful bid to buy US pharmaceutical company Actavis for more than $13 billion.
The transaction also replaces a plan launched in March for Bausch & Lomb to undertake an initial public offering.
Valeant said the transaction will be financed with debt and approximately $1.5 billion to $2.0 billion of new equity.
Of the purchase price, $4.5 billion will go to an investor group led by Warburg Pincus and approximately $4.2 billion will be used to repay Bausch & Lomb's outstanding debt.
Bausch & Lomb will retain its name and become a division of Valeant while Valeant's existing ophthalmology businesses will be integrated into the Bausch & Lomb division.
The transaction, which is expected to close in the third quarter, is subject to closing conditions and regulatory approvals.