H  VALEANT TO BUY BAUSCH &amp;  LOMB FOR $8.7 BILLION 

S1  Bausch & Lomb, the eye care company, agreed Monday to sell itself to Valeant Pharmaceuticals International of Canada for about $8.7 billion, sidestepping the lengthier process of an initial public offering.

S2  Under the terms of the deal, Valeant will pay $4.5 billion to the investor group that owns Bausch & Lomb, led by the private equity firm Warburg Pincus.
S3 It will also spend about $4.2 billion to repay Bausch & Lomb’s debt.

S4  The deal continues the 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.
S5 Announced merger volume in the sector this year is up 14 percent from the period a year earlier, even as takeovers have fallen 8 percent.

S6  Valeant, which is based in Laval, Quebec, has made acquisitions a core part of its growth strategy.
S7 The Bausch & Lomb deal is the company’s biggest yet, over three times larger than the $2.6 billion purchase of the skin care company Medicis Pharmaceutical last year.

S8  Adding Bausch & Lomb, a giant maker of contact lens solution and surgical devices, will significantly bolster Valeant’s offerings in the sector.
S9 Bausch & Lomb 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.

S10  “We believe it’s a great move for the company,” J. Michael Pearson, Valeant’s chief executive, said in an interview by phone.
S11 “There’s an opportunity for a lot of singles and doubles here.”

S12  The takeover also means a tidy payday for Warburg Pincus, which led a $4.5 billion leveraged buyout of Bausch & Lomb in 2007.
S13 The firm already benefited from a $772 million special dividend Bausch & Lomb paid out in March, the bulk of which went to its controlling investor group.

S14  Through the deal, Warburg Pincus is expected to reap a return of as much as three times its original investment, according to a person briefed on the matter.

S15  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 bidders.
S16 Among them was Valeant, though Pearson said that at the time he and his board could not justify paying the more than $10 billion Warburg Pincus was seeking.

S17  Instead, Bausch & Lomb filed for an initial public offering in March.

S18  Until last month, Valeant was pursuing a takeover of a different company, the generic drugmaker Actavis, in what would have been a deal worth over $13 billion.
S19 When those talks collapsed, Valeant then pivoted to Bausch & Lomb.
S20 Pearson said the bulk of the work on Monday’s transaction took place over last week, with much of the initial due diligence having been completed already.

S21  Though Valeant’s offer was lower than the valuation Bausch & Lomb would have fetched in an initial offering, it allowed Warburg Pincus to exit its investment quickly.
S22 Taking the eye care company public would have meant a more gradual sale over two to three years.

S23  The transaction is expected to close in the third quarter, pending regulatory approval.

S24  Pearson said that while integrating Bausch & Lomb would take some time, Valeant will continue to pursue what he described as smaller “tuck in” acquisitions.
S25 But deal-making will remain a core part of the company’s growth plans.

S26  “Our strategy is our strategy,” he said.
S27 “Our aspiration is to become the most valuable pharmaceutical company in the world.”

