Valeant Pharmaceuticals has agreed to buy Bausch & Lomb from Warburg Pincus for $8.7 billion, a cash deal set to vault the Canadian company into the upper ranks of the global pharmaceutical sector.

The purchase strengthens Valeant’s offerings in ophthalmic pharmaceuticals, contact lenses and lens care products, along with adding ophthalmic surgical devices and instruments to its portfolio.

Valeant shares rose nearly 8 per cent in Toronto to $93.71, touching an all-time high. It had gained 13 per cent on Friday following reports a deal was in the works. The company’s stock has multiplied six times over in about three years, with Valeant racking up some 60 deals since 2008.

Bausch & Lomb is by far Valeant's biggest acquisition to date, and will place it roughly among the 15 largest global pharmaceutical companies, said Valeant chief executive Michael Pearson.

“This is a 160-year old company and brand name. I think we’ll be able to really leverage that,” he said, adding that the deal will boost Valeant’s 2013 earnings.

Talks with Bausch & Lomb have been going on and off for a few years but intensified in recent weeks, Mr Pearson said, adding that opthalmology is attractive for its growth prospects and Bausch & Lomb’s large proportion of sales directly to consumers is also appealing.

Laval, Quebec-based Valeant plans to keep all three of Bausch & Lomb’s segments of contact lenses, pharmaceuticals and surgical instruments, said Mr Pearson, putting to bed some market speculation from Friday that the company may seek to sell the surgical instruments arm.

The Bausch & Lomb deal also gives Valeant the large scale of operations that it lacked in China and emerging markets like the Middle East, Mr Pearson said. "We are thrilled about the deal," said James Telfser, a portfolio manager at Caldwell Investment Management.

“We are invested in Valeant right now, because we want something exposed to the U.S. and emerging markets and this definitely just beefs up that thesis.”