Bausch & Lomb Headquarters

Canada’s leading pharmaceutical company Valeant Pharmaceuticals has entered into a definitive agreement to acquire Bausch + Lomb Holdings, a US-based supplier of eye health products, for $8.7bn.

Bausch + Lomb provides vision care products such as contact lenses and solutions; surgical devices such as intraocular lenses and surgical equipment and pharmaceutical drugs such as prescription brands, generics and over-the-counter (OTC) drugs.

The acquisition is a part of Valeant’s strategy to take advantage of the growing demand for eye health products, which is driven by an aging patient population, an increased rate of diabetes and demand from emerging markets.

Bausch + Lomb will retain its name and become a division of Valeant, while the existing ophthalmology businesses of Valeant will be merged with the Bausch + Lomb unit.

Under terms of the deal, which were approved by the the board of directors of both companies, Valeant will pay approximately $4.5bn in cash to an investor group led by US-based private equity firm Warburg Pincus and about $4.2bn to repay Bausch + Lomb’s outstanding debt.

Valeant expects to generate a minimum of $800m in annual cost savings by the end of 2014, while Bausch + Lomb expects to have approximately $3.3bn of revenues and adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of about $720m in 2013.

Valeant plans to finance the transaction with debt and approximately $1.5 bn – $2bn of new equity.

Valeant chairman and CEO J Michael Pearson said that acquisition will transform Valeant into a global leader in eye health.

"Bausch + Lomb’s world-renowned brand, comprehensive portfolio of leading eye care products, and promising late stage pipeline are an ideal strategic fit for our current ophthalmology business and we are strongly committed to continuing to build a sustainable eye health business," Pearson said.

"With this transaction, Valeant will be a worldwide leader in both dermatology and eye health."

Bausch + Lomb CEO Brent Saunders said; "Valeant’s acquisition of our company is a testament to the tremendous value our talented employees have created over the past several years."

"I am confident that under their stewardship, the Bausch + Lomb brand will continue to stand for excellence and innovation in eye health," Saunders added.

The transaction, which is subject to customary closing conditions and regulatory approvals, is expected to close in the third quarter of this year.

Following the closing, Saunders will join Valeant in an advisory role to facilitate a seamless transition and integration, while Fred Hassan, chairman of Bausch + Lomb’s board of directors, will join Valeant’s board of directors.

Image: Bausch & Lomb headquarters in New York. Photo: Courtesy of Daniel Penfield.