Valeant will pay $19.75 per share in cash for Long Beach, Calif.-based Obagi, an offer representing a 28% premium to the company's $15.39 per share close on Tuesday. Obagi's board of directors unanimously approved the deal.

At a $360 million stock valuation, the offer comes in at roughly 3 times Obagi's $120.7 million in revenue in 2012.

A majority of Obagi's shareholders must agree to tender their shares for Valeant to close the deal. Should they do so, Valeant will then proceed with a merger, meaning that any shares not tendered will be converted into the right to receive $19.75 per share in cash.

Obagi's largest stockholders as of its last proxy filing in April were BlackRock Inc. (11.7%), Royce & Associates Inc. (9.8%), Paradigm Capital Management Inc. (6.6%), Ameriprise Financial Inc. (5.4%) and Visium Balanced Master Fund Ltd. (5.1%).

Valeant and Obagi expect to close the deal during the second quarter of 2013.

The deal will be immediately accretive to Valeant's cash earnings per share and will yield cost synergies at an annual run rate of at least $40 million within six months of closing.

Obagi markets topical aesthetic and therapeutic skin health products under brand names such as Obagi Nu-Derm, Condition & Enhance, ELASTIDerm and CLENZIDerm. Its over-the-counter, cosmetic and prescription products are designed to prevent and treat the most common and visible skin disorders, such as premature aging, photodamage, hyperpigmentation, acne, sun damage, facial redness and wrinkles.

Obagi's product line further broadens Valeant's cabinet of dermatology products. Valeant has specifically targeted dermatology buyouts as a key growth driver in its growth-through-acquisition strategy, most notably paying $2.6 billion for Medicis Pharmaceuticals Inc. in 2012 in a deal that formed a skin care powerhouse. Even before that, in July 2011, Valeant aggressively spent money to expand its skin care operation, shelling out roughly $800 million in July 2011 alone to buy Dermik Laboratories Inc. (Sanofi's dermatology business) and the Ortho Dermatologics division of Janssen Pharmaceuticals Inc.

Valeant is focusing on dermatology because many of the products are small from a revenue standpoint. As a result, Big Pharma doesn't focus on them as much. What's so attractive about dermatology products is that they're not as dependent on reimbursement pressures as other branded pharmaceuticals. Also, since many dermatology products are topical treatments, they don't face nearly as much generic competition as do branded drugs, because the Food and Drug Administration typically requires full clinical trials for topical treatments when they go generic.

Valeant's skin care segment, now the largest of its business lines, accounted for about $1.16 billion, or 33%, of its nearly $3.55 billion in revenue in 2012.

Valeant is one of the sector's most avid buyers because it spends very little on internal research and development to create its portfolio. It spent just $79.1 million on internal R&D in 2012, according to regulatory filings. Valeant instead uses much of its cash to buy portfolio additions in niche areas that Big Pharma tends to shy away from. As such, Valeant has built itself acquisition by acquisition, accumulating products and companies on its way to becoming a megapharmaceutical company with a number of product lines, among them dermatology, neurology, consumer brands and branded generics. It has even branched out into areas such as dental health, nutritional supplements and podiatry through various purchases in 2012.

Valeant's skin care segment is carried by branded ointments and creams for herpes (Zovirax, Xerese), eczema (Elidel) and acne (Acanya, Atralin), though the pharma giant added items such as oral acne drug Solodyn, Botox rival Dysport and anti-aging cream Restylane, among other products, through the Medicis buyout in 2012.

"The acquisition of Obagi will be a valuable supplement to Valeant's current dermatology portfolio and will further build upon our growing aesthetics franchise," said Valeant CEO J. Michael Pearson in a statement.

Obagi was formed as WorldWide Product Distribution Inc. in 1988 and went public in 2006 at $11 per share.

Jenner & Block LLP was the Obagi's legal counsel, while Morgan Stanley was its financial adviser.

Marie Gibson, Stephen Arcano, Matthew Zisk, Erica Schohn, Jessica Miller, David Schwartz, Steven Sunshine and Ingrid Vandenborre of Skadden, Arps, Slate, Meagher & Flom LLP represented Valeant.