Valeant Pharmaceuticals has entered an agreement to acquire Bausch & Lomb for $8.7 billion. The acquisition, which was unanimously approved by the boards of both companies, will result in Valeant paying $4.5 billion to B&L’s private equity ownership group, led by Warburg Pincus, and paying another $4.2 billion to repay B&L’s outstanding debt. The buyout will be financed with debt and approximately $1.5 to $2.0 billion in new equity.

B&L’s 2013 revenues are expected to be approximately $3.3 billion. If the acquisition has occurred on Jan. 1, 2013, Valeant contends it would have boosted cash earnings per share by 40% for the year. Valeant expects to achieve at least $800 million in cost savings by the end of 2014, although it has not specified how many layoffs it expects to make as part of those savings.

B&L will retain its name, become a division of Valeant, and incorporate Valeant’s existing ophthalmology businesses. Valeant’s chairman and chief executive officer, J. Michael Pearson, said, “We are excited to announce the acquisition of Bausch & Lomb, which will transform Valeant into a global leader in eye health by significantly strengthening our capabilities in ophthalmic pharmaceuticals, contact lenses and lens care products, and ophthalmic surgical devices and instruments. B&L’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. With this transaction, Valeant will be a worldwide leader in both dermatology and eye health.”

Fred Hassan, B&L’s chairman, will join Valeant’s board of directors. Mr. Hassan helped engineer the M&As of Pharmacia and Schering-Plough, when he held chief executive officer roles at those companies.

In other news, Valeant received a Complete Response Letter (CRL) from the FDA regarding its NDA for efinaconazole for the treatment of onychomycosis, a nail infection. The issues raised by the FDA in the letter pertain to Chemistry, Manufacturing and Controls (CMC) regarding the container closure apparatus. No efficacy or safety issues were raised by the FDA, according to Valeant. The company contends that the CMC items can be addressed and is working for a timely response to the FDA.