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

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

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The deal bolsters Teva’s position as the world’s largest makerof generic drugs, and gives it greaternegotiating power with governments and private-health insurers. Italso allows the drugmaker to extricate itself from an increasinglyantagonistic pursuit of Mylan, which is in the midst of trying tobuy Perrigo Co.

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“We’re looking at a fairly similar deal to the Mylan offer butwithout all the uncertainties attached to a hostile situation,”said Jonathan Kreizman, an analyst at Bank of Jerusalem. “Teva andAllergan have less overlap than Teva and Mylan.”

The acquisition extends a wave of mergers that has swept overthe health care industry. Announced pharmaceutical deals so farthis year have topped $180 billion, according to data compiled byBloomberg. 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 isdeveloping a fast-acting antidepressant. The $560 million all-cashtransaction is expected to close by year-end.

Bitter conflict

Teva expects the transaction, which both boards backedunanimously, to close in the first quarter of 2016 and boostearnings per share.

Also today, the company raised its earnings per share estimatefor 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 secondquarter, Teva said.

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

Last week, Mylan’s independent foundation exercised an option toacquire shares that let it control half of the company in a movethat rendered Teva’s attempt to win over a majority of itsshareholders much more difficult. Abbott Laboratories, Mylan’s topshareholder, in June said it also backed Mylan’s plan to avoidbeing taken over by Teva.

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

Cost savings

Barclays and Greenhill & Co. are serving as financialadvisors to Teva. Sullivan & Cromwell LLP and Tulchinsky SternMarciano 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 thirdanniversary of the deal’s close. The savings will come fromefficiencies in operations, manufacturing, and sales and marketing,it said.

Allergan, based in Dublin and with operating headquarters inParsippany, New Jersey, is itself the product of a recent merger.Actavis Plc agreed to buy Allergan for $66 billion in November2014, after spending months locked in bitter conflict with ValeantPharmaceuticals International Inc., a rival drugmaker that hadstarted a hostile takeover effort that year. The deal was completedin March.

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

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