Canada's biggest public pharmaceutical company, Biovail, is combining with California-based Valeant in a $3.2 billion merger that will create a new specialty pharmaceutical group with a global presence and portfolio.

The new company, Valeant Pharmaceuticals International, will focus on four platforms, including specialty central nervous system, dermatology medicines, the Canadian market, and branded generics in emerging markets.

Mike Pearson, Valeant's CEO and chairman will lead the combined company, which expects to realize $175 million in annual savings by its second year. Bill Wells, Biovail's CEO will become non-executive chair of the combined company.

Pearson says that both companies will benefit from “cost savings, greater scale, efficiencies from extending Biovail's corporate structure, and enhanced financial strength and flexibility.”

Part of those efficiencies will be realized through staff reductions of between 15 and 20 percent of the combined companies’ total staff, or about 660 to 880 jobs, according to the Waterloo Region Record.

Valeant stockholders will receive a one-time special cash dividend of $16.77 per share immediately prior to closing of the merger and 1.78 shares of Biovail common stock upon closing of the merger for each share of Valeant common stock they own. For Biovail shareholders, the deal represents a 15 percent premium, according to a company statement. They will own 50.5 percent of the merged company while Valeant shareholders will own 49.5 percent.

The new company will be headquartered in Mississauga, Ontario and will continue to trade on the Toronto and New York Stock exchanges. A new U.S. headquarters has yet to be chosen.