Valeant Pharmaceuticals (NYSE:VRX, TSE:VRX) confirmed its rumored buyout of Bausch & Lomb, saying it will pay $8.7 billion in cash to acquire the eye care giant from private equity owner Warburg Pincus.
The deal for Rochester, N.Y.-based B&L includes a $4.5 billion payment to a group led by Warburg Pincus and another $4.2 billion to pay off Bausch & Lomb’s debts, according to a press release.
Rumors swirled last week that Valeant was close to snaring its prize. The Laval, Quebec-based pharma firm reportedly beat out a last-minute run from Indian rival Sun Pharmaceutical Industries (NSE:SUNPHARMA), according to the Wall Street Journal, citing "people familiar with the negotiations."
Valeant said it expects to save "at least" $800 million annually by the end of next year, after it integrates its own ophthalmology businesses under the Bausch & Lomb brand. The buyout nearly doubles its annual revenues; Valeant posted sales of $3.6 billion last year, while Bausch & Lomb is expected to log sales of $3.3 billion in 2013, according to the release. The Canadian pharmaceutical company said it plans to finance the deal with debt backed by Goldman Sachs Bank USA and $1.5 billion to $2.0 billion in new equity.
"We are excited to announce the acquisition of Bausch & Lomb, which will transform Valeant into a global leader in eye health by significantly strengthening our capabilities in ophthalmic pharmaceuticals, contact lenses and lens care products, and ophthalmic surgical devices and instruments. 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. With this transaction, Valeant will be a worldwide leader in both dermatology and eye health," Valeant chairman & CEO Michael Pearson said in prepared remarks.
"Bausch & Lomb has undergone a profound transformation over the last few years. We introduced innovative new products for patients; built a robust pipeline; expanded into new markets; and strengthened our relationships with eye care professionals around the world. Valeant’s acquisition of our company is a testament to the tremendous value our talented employees have created over the past several years," added Bausch & Lomb CEO Brent Saunders, who’s slated to stay on board during the transition "in an advisory role."
B&L chairman Fred Hassan will join Valeant’s board, with B&L’s global pharma president Dan Wechsler will become Valeant’s group chairman of ophthalmology & eye health. Bausch & Lomb chief medical officer Dr. Calvin Roberts will become CMO for ophthalmology & eye health under the new ownership. The deal is expected to close during the 3rd quarter.
Warburg Pincus, which acquired B&L in 2007 for $4.5 billion, hired Goldman Sachs late last year to shop the eyecare company. When the $10 billion asking price proved too steep to attract potential suitors including Sanofi (NYSE:SNY), GlaxoSmithKline (NYSE:GSK), and Abbott (NYSE:ABT), the PE shop moved to stage an initial public offering.
