Teva has this morning (Monday) confirmed a $40.5-billion offer to acquire Allergan’s generics division, and that it is pulling back from its pursuit of Mylan.

The Israeli drugmaker is shelling out $33.75 billion in cash and shares valued at $6.75 billion on closing of the deal, which will see it become a top 10 global pharmaceutical company.

According to Teva, the strategic acquisition will bring together two leading generics businesses with complementary strengths, brands and cultures, “providing patients with more affordable access to quality medicines, and creating significant financial benefits for Teva stockholders”.

“With pro forma revenues of approximately $26 billion and combined EBITDA of approximately $9.5 billion anticipated in 2016, this acquisition reinforces our strategy, accelerates growth and diversifies revenues both by product and geographically, supporting our new business model,” noted Erez Vigodman, Teva’s president and chief executive.

Teva also said it expects to achieve cost synergies and tax savings of around $1.4 billion a year, largely achievable by the third anniversary of the closing of the transaction, as well as savings from other operational efficiencies.

The transaction was unanimously approved by both Boards of Directors and is expected to close in the first quarter of next year.

Withdrawal from Mylan

Teva also confirmed that it has withdrawn its cash and stock proposal to acquire all of the outstanding ordinary shares of Mylan.

“We believe we have an even greater opportunity to create compelling, sustainable value for Teva’s stockholders through our transaction with Allergan – and we acted quickly to seize the opportunity,” Vigodman said explaining the change of heart.

Earnings outlook boosted

News of the deal came as Teva posted a 2% drop in second-quarter revenues to $4.97 billion, although taking currency effects out of the equation sales were actually up 6%. 

The group did post a 16% rise in non-GAAP operating income to $1.6 billion, and upped its full-year guidance on “positive momentum across the business”, now expecting EPS of $5.15 to $5.40 compared to the previously forecast $5.05 to $5.35.