Valeant Pharmaceuticals to Buy Bausch & Lomb for $8.7 Billion in Cash

By Euan Rocha and Rod Nickel

TORONTO -- Valeant Pharmaceuticals International said on Monday it agreed to buy Bausch & Lomb Holdings Inc from Warburg Pincus LLC for $8.7 billion in cash, a deal expected to transform Valeant into a global leader in eye care.

The purchase is seen strengthening Valeant's capabilities in ophthalmic pharmaceuticals, contact lenses and lens care products, along with adding ophthalmic surgical devices and instruments to its portfolio of offerings.

Valeant shares jumped more than 7 percent to C$93.25, after a 13 percent advance Friday, fueled by rumors of the deal.

"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," Valeant Chief Executive Michael Pearson said in a statement. "With this transaction, Valeant will be a worldwide leader in both dermatology and eye health."

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Valeant has been on the acquisition trail since its 2010 takeover by Biovail Corp., which assumed the Valeant name. It has been pursuing deals with strong cash flow in high-growth areas where big pharmaceutical companies have little presence.

The company, known for prescription drugs such as anti-depressant Wellbutrin and over-the-counter remedies such as Cold-FX, has built up its dermatology and anesthetics portfolio in a dozen deals in the past year, most recently for Obagi Medical Products.

Last month Valeant attempted to acquire generic drugmaker Actavis Inc in an all-stock deal that would have topped $13 billion, according to sources familiar with the matter. The talks broke down, and Actavis ended up with a deal to buy pharmaceutical company Warner Chilcott.

The acquisition of Bausch & Lomb will bring ISTA Pharmaceuticals into the Valeant fold. Valeant attempted to buy ISTA in 2012, but its offer was trumped by Bausch & Lomb.


The deal, to be financed through debt and equity, will see some $4.5 billion go to an investor group led by Warburg Pincus LLC, with some $4.2 billion used to pay down Bausch & Lomb's outstanding debt.

The deal will be financed with debt and about $1.5 billion to $2.0 billion of new equity, said Valeant, which has secured committed debt financing from Goldman Sachs.

Valeant expects the deal to result in at least $800 million in annual cost savings by end of 2014. Bausch & Lomb is expected to generate revenues of about $3.3 billion and adjusted earnings before interest, taxes, depreciation and amortization of about $720 million in 2013.

Laval, Quebec-based Valeant said the deal is expected to be immediately accretive to its cash per-share earnings.

The company said Bausch & Lomb's CEO Brent Saunders will join Valeant in an advisory role to ensure a seamless transition and integration. Fred Hassan, Chairman of Bausch & Lomb's board of directors, will join Valeant's board following the close of the deal.

The transaction, expected to close in the third quarter, is subject to closing conditions and regulatory approvals.

Valeant's legal advisors were Skadden, Arps, Slate, Meagher & Flom LLP and Osler, Hoskin & Harcourt LLP. Bausch & Lomb was advised by Cleary Gottlieb Steen & Hamilton LLP.

Goldman, Sachs & Co. and J. P. Morgan Securities LLC acted as financial advisors to Bausch & Lomb on the deal.