Valeant Pharmaceuticals will acquire Bausch + Lomb for $8.7 billion cash, the companies said yesterday, creating a more-than-$3.5 billion-a-year eye-care giant focused on ophthalmic pharmaceuticals, contact lenses, lens care products, and ophthalmic surgical devices and instruments.

Under the deal, Valeant will pay about $4.5 billion to an investor group led by Bausch + Lomb’s current owner, Warburg Pincus, and spend the remaining roughly $4.2 billion to repay Bausch + Lomb’s outstanding debt. Bausch + Lomb will retain its name and become a division of Valeant, which will integrate its existing ophthalmology businesses into the new division.

Valeant said it expects the new division to generate some $3.3 billion in revenues this year—about as much as the $3.55 billion in revenues racked up last year by the entire company. Valeant also expects the new Bausch + Lomb division can achieve at least $800 million in annual cost savings by the end of 2014, on top of roughly $720 million this year in adjusted earnings before interest, taxes, depreciation, and amortization.

The deal comes some two months after Bausch + Lomb filed for an initial public offering seeking to raise up to $100 million. The IPO was filed following news reports that Warburg Pincus tried but failed to sell Bausch + Lomb for at least $10 billion.

Valeant, Canada’s largest domestic drug developer, reasons that it can capitalize on an aging patient population, an increased rate of diabetes, and demand from emerging markets through its latest acquisition. Bausch + Lomb is the 15th acquisition announced by Valeant since 2010, when the pharma company was created through a merger of an eponymous U.S. predecessor and Canadian-owned Biovail. Since then, Valeant has positioned itself as a specialty maker of branded pharmaceuticals, branded generics, and over-the-counter products, with a partial focus on dermatology.

“With this transaction, Valeant will be a worldwide leader in both dermatology and eye health,” J. Michael Pearson, Valeant’s chairman and CEO, insisted in a statement. “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.”

Last year, Valeant signaled increased interest in eye care by acquiring the age-related blindness drug Visudyne from QLT for $112.5 million, and the maker of anti-VEGF inhibitor Macugen®, Eyetech, for an undisclosed “up-front payment and potential future milestones that total significantly less than two times sales.” Both deals enabled Valeant to expand an eyecare portfolio it snapped up with Aton Pharma in 2010.

Previous articleAstraZeneca Acquires Omthera in Up to $443M Deal
Next articleGene Study: Schizophrenia Not a Single Disease