Valeant Pharmaceuticals International has announced that it will acquire Bausch + Lomb for $8.7bn in cash.

Eye health company Bausch + Lomb’s three business segments offer pharmaceutical materials such as prescription and over-the-counter products, surgical equipment and ‘vision care’ products that include contact lenses.

According to the agreement, which received unanimous approval by the board of directors of both companies, Valeant will put forward the total sum of $8.7bn in cash, with $4.5bn of that amount being paid to an investor group headed by Warburg Pincus and another $4.2bn will go towards repaying Bausch + Lomb’s remaining debt.

Valeant’s chairman and chief executive officer J Michael Pearson said the acquisition of Bausch + Lomb would strengthen Valeant’s capabilities in ophthalmic pharmaceuticals, contact lenses and lens care products, as well as 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,” said Pearson. “With this transaction, Valeant will be a worldwide leader in both dermatology and eye health.”

“Valeant will put forward the total sum of $8.7bn in cash.”

Bausch + Lomb chief executive officer Brent Saunders described his company’s transformation over the last few years through the introduction of new products, the creation of a robust product pipeline and expansion into new markets.

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“Valeant’s acquisition of our company is a testament to the tremendous value our talented employees have created over the past several years,” Saunders said.

Valeant believes it will achieve minimum annual cost savings of $800m by the end of 2014, while Bausch + Lomb anticipates its revenues will be around $3.3bn and its adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) will be around $720m in 2013.

The acquisition will involve debt financing from Goldman Sachs and roughly $1.5bn-$2bn of new equity.

As part of the agreement, Bausch + Lomb will be able to keep its brand name, but it will be developed into a division of Valeant.

Valeant will incorporate its current ophthalmology businesses into the Bausch + Lomb division, forming a global eye health programme that is estimated to achieve a net revenue of more than $3.5bn in 2013.