So the rumours were right – Israel’s Teva is to acquire Barr Pharmaceuticals in a deal that is worth almost $9 billion.

After a couple of days of feverish speculation, the Israeli drugmaker announced that it has made a cash and stock offer worth $66.50 a share, a premium of 42% on Barr’s closing price on July 16, which values the latter firm at $7.46 billion. Teva is also assuming debt of around $1.5 billion.

Explaining the rationale behind the deal, Teva said it will expand its leadership position in the USA and significantly strengthen its activities “in key European and central and eastern European markets”. On a pro forma basis, 2007 revenues of the combined company would have been $11.9 billion and it will have direct operations in more than 60 countries and employ 37,000 people.

The Petah Tikva-headquartered firm noted that the acquisition gives it more “Paragraph IV and first to file opportunities” and also bolsters Tits specialty pharmaceutical platform through the addition of Barr's “substantial women's health portfolio”. Chief executive Shlomo Yanai said the deal “will elevate Teva's market leadership to a new level” and allow the firm “to exceed our 20/20 goals [ie a doubling of revenujes to $20 billion] for 2012."

Mr Yanai continued by saying that "we have long admired Barr as a highly-focused company with an excellent management team”. This is a transaction, he added, which will see “two great, strong companies…joining forces to capture an even greater share of the growing opportunities in generics”.

On a conference call, Mr Yanai noted that there is “minimal overlap between the two companies,'' which was “one of the most attractive points when looking at Barr”. He added that he does not expect any major divestitures once the deal is done. His counterpart at Barr, Bruce Downey, who will leave once the deal is done, noted that the sale has the full support of the board of directors and senior management, though a termination fee of $200 million has been agreed if Barr pulls out or receives a better offer.

The transaction is expected to be completed late this year and be accretive to Teva’s earnings in the fourth quarters after closing. It will generate at least $300 million in annual cost savings within three years and will provide additional savings “well beyond 2011”, the buyer said.

Reaction to the deal has been pretty positive and Ricky Goldwasser, an analyst at UBS, issued a note saying that “the combination is both strategic and operationally sound''. Ken Cacciatore at Cowen & Co called it "a very positive strategic transaction" and Goldman Sachs analyst Randall Stanicky noted that Barr would give Teva about 1,400 salespeople in Europe and a leading position in both generic and branded women's health products.