Eye care company Bausch + Lomb is being purchased by one of Canada’s largest pharmaceutical companies, Valeant Pharmaceuticals International, for $8.7 billion, the two companies announced on Monday.
Under the terms of the definitive agreement, the publicly-owned Valeant will pay $8.7 billion in cash, with approximately $4.5 billion going to an investor group led by private equity firm Warburg Pincus and approximately $4.2 billion to be used to repay Bausch + Lomb (privately owned) outstanding debt.
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According to a press release from the two companies, Valeant expects $800 million in annual cost savings by the end of 2014 and expects the transaction to be immediately accretive (estimated at 40 percent) to its cash earnings per share.
The acquisition will be financed with debt and approximately $1.5 billion to $2 billion in new equity. Goldman Sachs has committed to financing the debt. The financing will be approximately 55 percent bank debt and 45 percent bonds, according to an investor slide presentation on the transaction available on Valeant’s website.
According to those slides, Valeant views the transaction as attractive because the eye health market is a growing one spurred by an aging population, increased numbers of diabetes patients and rising wealth in emerging markets. It also offers lower exposure to reimbursement pressures and greater opportunities for lower-risk innovation.
Bausch + Lomb will retain its name and become a division of Valean,t and Valeant’s existing eye businesses will roll into the Bausch + Lomb division. Bausch + Lomb’s chief executive officer, Brent Saunders, will stay on in an advisory role through the transition and integration, and Fred Hassan, chairman of Bausch + Lomb’s Board of Directors, will join Valeant’s board.
Ahead of official word of the acquisition, Valeant stock rose from $74.67 on the U.S. stock market to $84.47 by the end of the day on May 24. When the U.S. market opened after the Memorial Day holiday, the company's stock rocketed to $91.80 and was hovering around $91.25 by mid-day Thursday. The transaction is expected to close in the third quarter this year.
Eye photo from Shutterstock.com.