Shares of Valeant Pharmaceuticals International Inc. rose in premarket trading Tuesday, a day after the Canadian drugmaker said it will pay $4.5 billion to buy privately held Bausch + Lomb and spend another $4.2 billion to repay its debt in a massive expansion of Valeant's ophthalmology business.
Valeant plans to finance the deal with a combination of debt and new stock. Investment firm Warburg Pincus leads an investment group that owns Bausch + Lomb.
Rochester, N.Y.-based Bausch + Lomb Holdings Inc. makes contact lenses, eye drugs and ophthalmic surgical devices.
Valeant said the deal will help it capitalize on increasing demand for contact lenses and other products because of aging populations, growing demand in emerging markets and increasing rates of diabetes. Complications of the complex blood sugar disorder can damage the eyes over time.
The deal requires approval from regulators and other standard closing conditions. It is expected to be completed in the third quarter.
Jefferies analyst Corey Davis said in a research note that the acquisition amounted to an "extraordinary deal" for Valeant. He noted that Bausch + Lomb has a lot of expense "fat" to cut, and the acquisition gives the drugmaker exposure to attractive markets outside the United States like China, Argentina and the Middle East.
Valeant shares jumped 13 percent last Friday to close the week at $84.47 after reports surfaced that the purchase was in the works. The stock then climbed another 10.7 percent, or $9.03, to $93.50 in premarket trading Tuesday.