Valeant Pharmaceuticals Intl Inc (NYSE:VRX) has been on an acquisition spree. Its latest purchase is Bausch + Lomb in an all-cash deal worth $8.7 billion. The stock of VRX has been rising over the past year and this takeover will increase it further.
Involved Parties
Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is the largest publicly traded Canadian drug maker. Headquartered in Montreal, Quebec, this multinational pharmaceutical company specializes in dermatological and neurological treatments that include prescription, non-prescription, and generic drugs.
The U.S. is its largest market, and its manufacturing sites are spread across Canada, Poland, Brazil, and Mexico. Its strategy is to develop, acquire, and commercialize new products through strategic partnerships and acquisitions of products and companies.
Bausch + Lomb is owned by an investor group led by Warburg Pincus and is best known for its contact lenses, lens care solutions, ophthalmic surgical devices, and eye drugs. The company was set to go public in 2013, but agreed to be acquired by Valeant Pharmaceuticals Intl Inc (NYSE:VRX).
The Acquisition
This is an all cash deal valued at $8.7 billion, and will be completed in the third quarter of 2013. Under the terms of the agreement, unanimously approved by the Board of Directors of both companies, Warburg Pincus will receive $4.5 billion. The other $4.2 billion will settle the outstanding debt of Bausch + Lomb.
Finance for the acquisition will be raised through debt and the issue of new equity worth $1.5 to $2 billion. Valeant Pharmaceuticals Intl Inc (NYSE:VRX)’s existing ophthalmology business will be integrated with Bausch + Lomb, which will retain their name as a unit of Valeant Pharmaceuticals Intl Inc (NYSE:VRX).
Competitors
Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) is Israel’s top drug company and the global leader in the makers of generic medicines. The company makes generic antibiotics, heart drugs, anti-depressants, etc. and branded pharmaceuticals for Parkinson’s and multiple sclerosis. Generic drugs are cheaper variants of patent-expired-medicines.
H Lundbeck A/S focuses on drugs that treat central nervous system disorders such as Parkinson’s, Alzheimer’s, depression, etc. The company spends around 20% of its revenue on research and development.
Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA)’s market cap of $32.5 billion, puts it ahead of Valeant Pharmaceuticals Intl Inc (NYSE:VRX)’s MV of $25.9 billion. H Lundbeck is more narrowly focused with a market cap of $3.7 billion only. The net income of Valeant is -$130 million, probably due to its acquisitions, while the corresponding figures for Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) and H Lundbeck are $1.7 billion and $1.1 billion, respectively.
