Bausch & Lomb, the eye care company, agreed on Monday to sell itself to Valeant Pharmaceuticals of Canada for about $8.7 billion, sidestepping the lengthier process of an initial public offering.
Under the terms of the deal, Valeant will $4.5 billion to the investor group that owns Bausch & Lomb, led by the private equity firm Warburg Pincus. It will also pay about $4.2 billion to pay off its new acquisition’s debt.
Monday’s deal highlights the continued flurry of deal-making in the health care industry, as companies seek to buy the growth they are hard-pressed to generate on their own. Announced merger volume in the sector for the year so far was up 14 percent percent from the same time last year, even as takeovers overall fell 8 percent for the same period.
Valeant, which is based in Laval, Quebec, has long made acquisitions a core part of its growth strategy. The Bausch & Lomb deal is the company’s biggest yet, over three times bigger than the $2.6 billion purchase of the skin care company Medicis Pharmaceutical last year.
Adding Bausch & Lomb, a giant maker of contact lens solution and surgical devices, will significantly bolster Valeant’s offerings in the sector. The eye care company will absorb its new parent’s existing ophthalmology operations, creating a business that is expected to generate over $3.5 billion in net revenue this year.
“With this transaction, Valeant will be a worldwide leader in both dermatology and eye health,†Valeant’s chairman and chief executive, J. Michael Pearson , said in a statement.
Monday’s takeover also means a tidy payday for Warburg Pincus, which led a $4.5 billion leveraged buyout of Bausch & Lomb in 2007. The investment firm already benefited form a $772 million special dividend that the eye care company paid out in March, the bulk of which went to its controlling investor group.
Warburg Pincus had begun exploring a sale or initial public offering for Bausch & Lomb late last year, and held preliminary talks with a number of potential suitors, people briefed on the matter have said. But the firm and its advisers did not unearth any possible bids that reached a target price of about $10 billion, and Bausch & Lomb filed for an initial public offering in March.
Until last month Valeant was pursuing a takeover of a different company, the generic drug maker Actavis, in what would have been a deal worth over $13 billion. When those talks collapsed, the Canadian pharmaceutical concern then pivoted to Bausch & Lomb.
The transaction closes is expected in the third quarter, pending regulatory approval.
Valeant was counseled by Skadden, Arps, Slate, Meagher & Flom and Osler, Hoskin & Harcourt. Bausch & Lomb was advised by Goldman Sachs, JPMorgan Chase and the law firm Cleary Gottlieb Steen & Hamilton.
