ROCHESTER (AP) - Canadian drugmaker Valeant Pharmaceuticals said on Monday that it will pay US$8.7 billion (S$11 billion) to buy Bausch + Lomb, one of the world's best-known makers of contact lenses, in a massive expansion of Valeant's smaller ophthalmology business.
Valeant said the cash deal will help it capitalise on increasing demand for contact lenses and other products because of aging populations, growing demand in emerging markets and increasing rates of diabetes. Complications of the complex blood sugar disorder can damage the eyes over time.
Investment firm Warburg Pincus, which leads an investment group that owns Bausch + Lomb, will receive US$4.5 billion in cash.
The remaining US$4.2 billion will be used to repay Bausch + Lomb's debt.
Reports that the purchase was in the works surfaced late last week.
The deal, which requires approval from regulators and other standard closing conditions, is expected to be completed in the third quarter. It will be financed with debt and about US$1.5 billion to US$2 billion in new stock.
Valeant expects to achieve at least US$800 million in annual cost savings by the end of next year.
Rochester, New York-based Bausch + Lomb Holdings makes contact lenses, eye drugs and ophthalmic surgical devices. It will keep its name and become a division of Valeant Pharmaceuticals International Inc., which is based in Laval, Quebec.
"I am confident that under their stewardship, the Bausch + Lomb brand will continue to stand for excellence and innovation in eye health," Brent Saunders, CEO of Bausch + Lomb, said in a statement.
The US$8.7 billion purchase price is about 2 1/2 times the 2012 revenue reported by Valeant, which specialises in dermatology medicines. It also sells a range of brand-name and generic drugs, as well as nonprescription medicines.
Valeant's CEO, J. Michael Pearson, said in a statement that the deal will make his company a world leader in both eye health and dermatology.