Valeant Pharmaceuticals International, Inc., a multinational specialty pharmaceutical company, and Bausch + Lomb Holdings Incorporated, the global eye health company, have entered into a definitive agreement under which Valeant will acquire Bausch + Lomb for $8.7 billion in cash.

Bausch + Lomb operates in three segments: Pharmaceutical (including prescription brands, generics and over-the-counter (OTC)), Vision Care (contact lenses and solutions), and Surgical (intraocular lenses and surgical equipment). The company has a broad portfolio of eye health products, including well-known prescription and OTC brands Besivance, Lotemax, Ocuvite and PreserVision; vision care brands Biotrue ONEday, PureVision, renu and Boston; and surgical brands enVista, Storz, Stellaris and VICTUS.

Under terms of the agreement, which was unanimously approved by the Board of Directors of both companies, Valeant will pay aggregate consideration of $8.7 billion in cash, of which approximately $4.5 billion will go to an investor group led by Warburg Pincus and approximately $4.2 billion will be used to repay Bausch + Lomb's outstanding debt. Valeant expects to achieve at least $800 million in annual cost savings by end of 2014. Bausch + Lomb expects to have revenues of approximately $3.3 billion and adjusted EBITDA in 2013 of approximately $720 million. The transaction is expected to be immediately accretive to Valeant's cash earnings per share. Assuming the transaction occurred on January 1, 2013 and assuming the full realization of synergies, the acquisition would have been approximately 40 per cent accretive to Valeant's expected 2013 Cash EPS.

The transaction will be financed with debt and approximately $1.5 - $2.0 billion of new equity. Valeant has secured fully committed debt financing for the transaction from Goldman Sachs Bank USA. Taking into account the anticipated equity raise, Valeant's debt to pro forma adjusted EBITDA ratio will be approximately 4.6 times.

Bausch + Lomb will retain its name and become a division of Valeant. Valeant's existing ophthalmology businesses will be integrated into the Bausch + Lomb division, creating a global eye health platform with estimated pro forma 2013 net revenue of more than $3.5 billion. The acquisition positions Valeant to capitalize on growing eye health trends driven by an aging patient population, an increased rate of diabetes and demand from emerging markets. The combined business will also benefit from access to a strong product portfolio and a late stage pipeline of innovative, new products.

Valeant's chairman and chief executive officer, J Michael Pearson, said, "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."

Brent Saunders, Bausch + Lomb's chief executive officer, said, "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." Saunders added, "Our companies have a shared commitment to providing innovative and high quality products and exceptional service to customers. I am confident that under their stewardship, the Bausch + Lomb brand will continue to stand for excellence and innovation in eye health."

Following the closing, Saunders will join Valeant in an advisory role to help ensure a seamless transition and integration and Fred Hassan, chairman of Bausch + Lomb's Board of Directors, will join Valeant's Board of Directors. In addition, Dan Wechsler, executive vice president and president of Bausch + Lomb's Global Pharmaceuticals, will join Valeant as executive vice president and Company Group Chairman, Ophthalmology and Eye Health. Bausch + Lomb's chief medical officer Calvin W Roberts, MD will also join Valeant as its chief medical officer, Ophthalmology and Eye Health. We also anticipate additional members of the senior management team to join Valeant.

The transaction, which is expected to close in the third quarter, is subject to customary closing conditions and regulatory approvals.

Skadden, Arps, Slate, Meagher & Flom LLP and Osler, Hoskin & Harcourt LLP served as Valeant's legal counsel, and Bausch + Lomb was advised by Cleary Gottlieb Steen & Hamilton LLP. Goldman, Sachs & Co. and J P Morgan Securities LLC acted as financial advisors to Bausch + Lomb.

Valeant Pharmaceuticals International, Inc. develops, manufactures and markets a broad range of pharmaceutical products primarily in the areas of dermatology, neurology and branded generics.