UPDATE 1-Bausch & Lomb to buy Ista for $500 mln

* Offer represents a premium of 9 pct to Ista's Monday close

* Baush & Lomb sees addition to EBITDA in first year after deal closing

* Baush & Lomb to partly fund the buy with cash on hand

* Companies expect deal to close in Q2 2012

March 26 (Reuters) - Bausch & Lomb said it agreed to buy Ista Pharmaceuticals Inc f or about $500 million in cash to broaden its portfolio of eye health products.

The purchase price of $9.10 represents a 9 percent premium to Ista's Monday close.

The deal comes close on the heels of Canadian drug maker Valeant Pharmaceuticals' failed attempt to buy Ista, despite a sweetened bid. Valeant finally gave up its pursuit of Ista in January, citing a lack of progress in talks.

Bausch & Lomb, a veteran in the eye healthcare space, said the acquisition would be a strategic fit and that it would add to earnings before interest, tax, depreciation and amortization in the first year after closing of the deal.

"This (acquisition) gives us four additional marketed products and nearly doubles our late stage research and development pipeline," Bausch & Lomb's chief executive officer Brent Saunders said on a phone interview.

The CEO said he expects to file for a marketing approval with the U.S. Food and Drug Administration for Ista's experimental eye inflammation drug Prolensa this year.

California-based Ista, which has annual revenue of about $130 million, is currently conducting efficacy studies on Prolensa in the late stage.

"Because Bausch & Lomb already manufactures nearly all of Ista's current U.S. products, our companies have known each other well for many years," CEO Saunders said in a statement.

Baush & Lomb plans to finance the buy with a combination of cash on hand and the proceeds of a $350 million term loan facility.

The deal, which has been approved by the boards of both companies, is expected to close in the second quarter of 2012, the companies said.

Bausch & Lomb was advised by Goldman, Sachs & Co. on the transaction, while Greenhill & Co. served as financial advisor to Ista.

Shares of Ista were trading up 8 percent at $9.03 after the bell.