Canadian drugmaker Valeant Pharmaceuticals said Monday that it will pay $8.7 billion to buy Bausch + Lomb, one of the world’s best-known makers of contact lenses, in a massive expansion of Valeant’s smaller ophthalmology business.

Valeant said the cash 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.

Investment firm Warburg Pincus, which leads an investment group that owns Bausch + Lomb, will receive $4.5 billion in cash. The remaining $4.2 billion will be used to repay Bausch + Lomb’s debt.

Reports that the purchase was in the works surfaced late last week, driving up shares of Valeant on Friday by 13.1 percent, to $84.47.

The deal, which requires approval from regulators and other standard closing conditions, is expected to be completed in the third quarter. It will be financed with debt and about $1.5 billion to $2 billion in new stock.

Valeant expects to achieve at least $800 million in annual cost savings by the end of next year, and said the acquisition will add to its profits immediately.

Rochester, N.Y.-based Bausch + Lomb Holdings Inc. makes contact lenses, eye drugs and ophthalmic surgical devices. It will keep its name and become a division of Valeant Pharmaceuticals International Inc., which is based in Laval, Quebec.

“I am confident that under their stewardship, the Bausch + Lomb brand will continue to stand for excellence and innovation in eye health,” Brent Saunders, CEO of Bausch + Lomb, said in a statement.

Valeant’s ophthalmology business will be folded into the new Bausch + Lomb division.

The combined global business would have 2013 revenue topping $3.5 billion on a pro forma basis, meaning the total of sales from both companies’ eye care businesses for the full year.

Much of that will come from Bausch + Lomb, which anticipates it will have revenue of about $3.3 billion this year.

The deal cements the combined business as one of the global leaders in eye care.

The $8.7 billion purchase price is about 2 1/2 times the 2012 revenue of $3.55 billion reported by Valeant, which specializes in dermatology medicines. It also sells a range of brand-name and generic drugs, as well as nonprescription medicines.