(Bloomberg) -- Israeli drugmaker Teva Pharmaceuticals Industries Ltd. agreed to buy the generic-drug business of Allergan Plc for about $40.5 billion in cash and stock, and ended its hostile bid for Mylan NV.

Teva will pay $33.75 billion in cash and $6.75 billion worth of shares at today’s price, or about 10 percent of the enlarged company, the Petach Tikva, Israel-based company said in a statement. Teva surged as much as 11 percent as trading resumed in Tel Aviv.

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The deal bolsters Teva’s position as the world’s largest maker of generic drugs, and gives it greater negotiating power with governments and private-health insurers. It also allows the drugmaker to extricate itself from an increasingly antagonistic pursuit of Mylan, which is in the midst of trying to buy Perrigo Co.

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“We’re looking at a fairly similar deal to the Mylan offer but without all the uncertainties attached to a hostile situation,” said Jonathan Kreizman, an analyst at Bank of Jerusalem. “Teva and Allergan have less overlap than Teva and Mylan.”

The acquisition extends a wave of mergers that has swept over the health care industry. Announced pharmaceutical deals so far this year have topped $180 billion, according to data compiled by Bloomberg. That’s on pace to beat last year’s record of more than $200 billion.

Allergan, which makes the blockbuster wrinkle treatment Botox, said Sunday it would buy the biotech company Naurex Inc., which is developing a fast-acting antidepressant. The $560 million all-cash transaction is expected to close by year-end.

Bitter conflict

Teva expects the transaction, which both boards backed unanimously, to close in the first quarter of 2016 and boost earnings per share.

Also today, the company raised its earnings per share estimate for 2015 to between $5.15 and $5.40, up from an earlier forecast of $5.05 to $5.35. Earnings per share were $1.43 in the second quarter, Teva said.

Teva had been pursuing a $40.1 billion deal to buy Mylan since April and solidify its role as the industry leader. Mylan rejected Teva’s advances.

Last week, Mylan’s independent foundation exercised an option to acquire shares that let it control half of the company in a move that rendered Teva’s attempt to win over a majority of its shareholders much more difficult. Abbott Laboratories, Mylan’s top shareholder, in June said it also backed Mylan’s plan to avoid being taken over by Teva.

Mylan is itself pursuing Dublin-based Perrigo, a campaign that may now get fresh impetus as pressure mounts to become bigger. Perrigo, which makes prescription and over-the-counter drugs, has thus far rebuffed Mylan’s $33 billion offer.

Cost savings

Barclays and Greenhill & Co. are serving as financial advisors to Teva. Sullivan & Cromwell LLP and Tulchinsky Stern Marciano Cohen Levitski & Co are its legal counsel.

Teva said it expects cost synergies and tax savings of about $1.4 billion a year, most of which should take place by the third anniversary of the deal’s close. The savings will come from efficiencies in operations, manufacturing, and sales and marketing, it said.

Allergan, based in Dublin and with operating headquarters in Parsippany, New Jersey, is itself the product of a recent merger. Actavis Plc agreed to buy Allergan for $66 billion in November 2014, after spending months locked in bitter conflict with Valeant Pharmaceuticals International Inc., a rival drugmaker that had started a hostile takeover effort that year. The deal was completed in March.

Last month, Actavis rebranded the combined company as Allergan. The combination created a health care giant with projected annual sales of more than $20 billion this year. The generics business generated sales of $6.75 billion last year. Teva’s current head of generics, Siggi Olafsson, is a former Actavis executive.

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Teva to buy Allergan&rsquo;s generic-drug unit for $40.5 billion

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Teva to buy Allergan’s generic-drug unit for $40.5 billion