Quebec-based Valeant Pharmaceuticals (NYSE:BHC) and U.S.-based Bausch & Lomb have entered into a definitive agreement whereby Valeant will purchase privately held Bausch & Lomb for a total of $8.7 billion in cash, the compannies announced today.
Of the $8.7 billion total value of the acquisition, an estimated $4.5 billion will go to a Warburg Pincus-led investor group, and the remaining $4.2 billion will be used to pay down Bausch & Lomb debt.
The deal, which has already received unanimous approval from the boards of directors of both companies, is expected to save Valeant as much as $800 million in annual expenses by the end of 2014. Upon completion of the transaction, Valeant expects it will be accretive immediately, adding to its earnings per share. Valeant CEO J. Michael Pearson was quoted in the press release as saying, "With this transaction, Valeant will be a worldwide leader in both dermatology and eye health."
Bausch & Lomb will retain its name and be combined with Valeant's existing ophthalmology unit. Several current Bausch & Lomb executives will make the transition to Valeant, including chairman of the Bausch & Lomb board Fred Hassan, executive vice president and president of global pharmaceuticals Dan Wechsler, and chief medical officer Dr. Calvin Roberts. Brent Saunders, Bausch & Lomb's current CEO, will stay on as an advisor during the transition phase. Bausch & Lomb employs more than 11,000 people worldwide.
Valeant will finance the transaction using a combination of debt, which it has already secured via Goldman Sachs, and approximately $1.5 billion to $2 billion in new equity. The deal is expected to close in the third quarter and is subject to customary closing conditions.
Fool contributor Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.