By Greg Roumeliotis and Jessica Toonkel
NEW YORK May 24 Canada's Valeant
Pharmaceuticals International is nearing a deal to
acquire eye care company Bausch & Lomb Holdings Inc from Warburg
Pincus LLC for about $9 billion, a person familiar with the
matter said on Friday.
Valeant shares spiked to their highest level since 2001 and
were up 13 percent at C$86.86 in afternoon trading in Toronto.
"This deal would not be too surprising given that Valeant
has said it wants to do a big, mega deal and there are not that
many candidates," said David Krempa, an analyst at Morningstar.
"Still, I would not expect that they are done doing big deals."
The source that spoke to Reuters on Friday requested
anonymity because the matter is not public. Montreal-based
Valeant could not be immediately reached for comment. Bausch &
Lomb and Warburg Pincus declined to comment.
The Wall Street Journal, which earlier reported on the talks
over Bausch & Lomb, said a deal might come as soon as next week.
Separately on Friday, the U.S. Department of Justice said
that ISTA Pharmaceuticals, which Bausch & Lomb acquired in March
2012 for $500 million, pleaded guilty to charges related to the
drug Xibrom, including offering doctors kickbacks to prescribe
it. ISTA will pay $33.5 million related to conduct from 2006 to
2011, Bausch & Lomb said in a statement.
"It kind of removes an obvious overhang," said a Valeant
shareholder. But "I would expect that, regardless of whether
Valeant was going to be interested in them or not."
The shareholder, who asked not to be named as the
transaction is not complete, said it makes sense for Valeant to
increase its clout in opthalmology by acquiring Bausch & Lomb.
Valeant had attempted to buy eye drugmaker ISTA in late 2011
in a hostile bid.
Last month Valeant tried to acquire generic drugmaker
Actavis Inc in an all-stock deal that would have topped
$13 billion, according to sources familiar with the matter. The
talks broke down, and Actavis ended up with a deal to buy
pharmaceutical company Warner Chilcott Plc.
"At first glance, it looks like Mike Pearson has pulled yet
another rabbit out of his hat," Gautam Dhingra, chief executive
of High Pointe Capital Management, a small Valeant investor,
said, referring to Valeant's CEO. "We are grateful for his
magical acts but keeping a close eye on whether it is possible
to keep pulling bigger and bigger rabbits out of the same hat."
Valeant has been on the acquisition trail since its 2010
takeover by Biovail Corp, which assumed the Valeant name. It has
been pursuing deals with strong cash flow in high-growth areas
where big pharmaceutical companies have little presence.
The company, known for prescription drugs such as
anti-depressant Wellbutrin and over-the-counter remedies such as
Cold-FX, has built up its dermatology and anesthetics portfolio
in a dozen deals in the past year, most recently for Obagi
Bausch & Lomb would bring to Valeant its well-known contact
lenses, drugs to treat eye conditions such as glaucoma, and
instruments and devices used in eye surgery.
If the deal goes through, some analysts wonder if Valeant
would spin off or sell Bausch & Lomb's surgical instruments
business. That area would be new to Valeant, and big players
including Novartis AG and Abbott Laboratories
are already entrenched there. About 17 percent of Bausch &
Lomb's $3 billion in revenues last year came from that business.
Valeant has become a stock market darling, jumping about 50
percent so far this year, in large part because of its success
in cutting costs at the companies it acquires, particularly in
research and development.
But Bausch & Lomb is run by a private equity firm, so
cost-cutting opportunities may be below average, Dhingra said.
Private equity firms generally have a reputation for being cost
Bausch & Lomb filed with U.S. regulators for an initial
public offering in March. At the same time, Warburg Pincus was
exploring an outright sale of the company, a source told