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TheDeal: Valeant Surges on $8.7 Billion Bausch & Lomb Acquisition

NEW YORK ( TheDeal) -- Valeant Pharmaceuticals International (VRX - Get Report) is surging Tuesday following its announced deal to acquire Bausch & Lomb Inc. from Warburg Pincus LLC for $8.7 billion, as the Canadian pharmaceutical company moves to capitalize on the ever-increasing demand for contact lenses and other eye health products.

Terms of the deal, formally announced on Monday, May 27, call for Laval, Quebec-based Valeant to pay $4.5 billion to an investor group led by Warburg Pincus, with the remaining $4.2 billion in cash to be used to repay Bausch & Lomb's outstanding debt.

Valeant was gaining 7.8% to $91.03 in mid-day trading.

Warburg bought the company in October 2007 for $4.5 billion in cash and assumed debt, and has extracted about $800 million out of Bausch in the years since.

Rochester, N.Y.-based Bausch makes contact lenses, solutions, optic surgical equipment and pharmaceuticals. The company is expected to generate Ebitda of $720 million on sales of $3.3 billion in 2013, and Valeant said it expects to be able to extract at least $800 million in annual cost savings by the end of 2014.

The deal will be financed with debt and upward of $2 billion of new equity. Valeant said it has secured fully committed debt financing for the transaction from Goldman Sachs Bank USA.

Post-deal Valeant's ophthalmology business will be folded into the company's new Bausch + Lomb division, creating an eye health unit with more than $3.5 billion in annual sales. Valeant said it expects to capitalize in future years on an expected surge in eye health needs driven by an aging patient population, an increase in diabetes rates and higher demand from emerging markets.

"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," Valeant chairman and CEO J. Michael Pearson said in a statement. "With this transaction, Valeant will be a worldwide leader in both dermatology and eye health."

A Skadden, Arps, Slate, Meagher & Flom LLP team led by Stephen Arcano, Marie Gibson and Jeffrey Brill is joining Osler, Hoskin & Harcourt LLP in advising Valeant. Bausch/&/Lomb was advised by attorneys with Cleary Gottlieb Steen & Hamilton LLP, with Goldman, Sachs & Co. and JPMorgan Securities LLC acting as financial advisers.
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