By Damian Garde and Eric Palmer
After rumors of balked-at price tags and an in-the-making IPO, eye-care giant Bausch + Lomb will soon belong to Valeant Pharmaceuticals ($VRX) in exchange for $8.7 billion.
Under the deal, expected to close next quarter, Valeant will fork over $4.5 billion to Warburg Pincus, Bausch's current owner, plus another $4.2 billion to settle the company's outstanding debt. After that, Valeant will fold Bausch into its existing eye-care business while keeping the brand name, predicting combined 2013 revenue of $3.5 billion and at least $800 million in annual savings by next year.
The dermatology-focused Valeant is looking to Bausch's growing ophthalmic offerings in both prescription and OTC drugs, along with its implants, surgical devices and lenses to make Valeant a global leader in the space, Valeant CEO J. Michael Pearson said.
"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," Pearson said in a statement. He said the deal also would give Valeant significant operations it lacked in China and emerging markets like the Middle East, Reuters reported.
Pearson said Valeant will spend this year integrating its various recent acquisitions but is not getting out of the M&A market altogether. It will still look for some smaller deals to round out its offerings. The company has been on a buying binge as Pearson grows it into a major force in the industry. In March, it picked up the skin-care company Obagi Medical Products for $344 million just a few months after closing its $2.6 billion deal for Medicis Pharmaceutical. It was rumored that Valeant was sizing up Actavis ($ACT) but that the generic drugmaker rejected it and at least one other offer. Pearson has said he wants to build Valeant into an operation with $20 billion in sales.
In the long run-up to Monday's deal, Warburg was said to want about $10 billion for its eye-care heavyweight, a price tag that scared off rumored suitors including Abbott Laboratories ($ABT) and Johnson & Johnson ($JNJ). But the private equity giant persisted, floating plans for an eventual IPO in what may have been an effort to inject some immediacy into the sale process. Now, with Valeant signed on as the company's next owner, Bausch is confident it can keep growing its market share and pipeline, CEO Brent Saunders said.
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