Valeant Pharmaceuticals Acquires Bausch & Lomb for $8.7 Billion

Michael Teague |

Bausch LombOn Monday, Warburg Pincus LLC and Valeant Pharmaceuticals International (VRX) agreed on a deal over the sale of the Warburg-owned eye-care company Bausch & Lomb Holdings.

Canada’s largest drug manufacturer, Valeant will pay $8.7 billion for the acquisition, some $4.2 billion of which will be used to pay off Bausch’s debts. The deal will be financed by up to $2 billion in equity as well as new debt. According to the company, Goldman Sachs (GS) has already agreed to put up the funds.

Rumors of the deal had begun circulating last Friday; however the news comes as somewhat of a surprise for Bausch & Lomb, who just this past March had appeared committed to an IPO. Instead, Warburg will unload the company for more than its original 2007 cost.

For Bausch, the deal is said to be the result of the hard work of CEO Brent Saunders to turn the company around subsequent to its purchase by Warburg. Monday’s sale-price is more than double what Bausch was worth before Saunders came on board and made shrewd acquisitions, introduced successful new products, and presided over strong yearly sales and earnings growth. He will stay on in an advisory role throughout the transition.

For Valeant, the deal has several attractive aspects to it.

Firstly, the low-interest rate climate that currently prevails makes debt-financing a sensible option.

Secondly, by expanding its previously smaller ophthalmology business with the acquisition of an already well-recognized brand name, Valeant will be in a much better position to profit from growing global demand for contact lenses and other eye care products.

Finally, Valeant expects the incorporation of its current eye-care business into Bausch & Lomb to immediately increase profits, with a result estimated at up to $3.5 billion in additional earnings for 2013.

The Quebec-based Valeant, with a market cap of $25.84 billion, has made acquisitions a central part of its growth strategy, with Bausch being its 15th purchase since 2010. Just last month, the company was in buyout talks with generic drug maker Activis, a deal that would reportedly have been worth some $13 billion, before that deal fell through.

Word of the deal sent shares for Valeant spiking on Friday to $84.50, a gain of over 13 percent, before the close of trading.

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Companies

Symbol Name Price Change % Volume
UAN CVR Partners LP representing Limited Partner Inter 5.25 -0.01 -0.10 84,559
VRX Valeant Pharmaceuticals International Inc. 25.09 0.04 0.16 5,996,956

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