Valeant and Biovail have agreed on a merger. The new company will be known as Valeant, but will be based in Biovail’s headquarters of Mississauga, Ontario, and retain Biovail’s business structure. The $2.8 billion deal has a complex, tax-free model involving Valeant dividends and Biovail share swaps for Valeant shareholders.

J. Michael Pearson, currently chairman and chief executive officer of Valeant, will serve as the new Valeant’s CEO, residing in Barbados, and Bill Wells, currently chief executive officer of Biovail, will be the non-executive chairman. The new company’s board will consist of 11 members, including five Biovail representatives, five Valeant representatives and one additional independent Canadian resident director to be identified through a search process, nominated by Valeant, and agreed upon by Biovail. Robert A. Ingram, currently lead director of Valeant, will serve as lead independent director of the new Valeant’s board.

Mr. Pearson said, “This compelling combination will create tremendous value for stockholders of both companies as our business benefits from cost savings, greater scale, efficiencies from extending Biovail’s corporate structure, and enhanced financial strength and flexibility. We are committed to delivering the anticipated cost savings benefits and, as we did with Valeant over the past two years, transforming the new entity into a diversified, specialty pharmaceutical company focused on growth and cash flow generation.”

The new company would have had pro forma annual revenues of $1.7 billion. The company expects to pare away at least $175 million in costs in its second year.