JERUSALEM—Teva Pharmaceutical Industries Ltd. (NYSE and TASE:TEVA) announced earlier this week that it has signed a definitive agreement with Allergan (NYSE:AGN) to acquire Allergan Generics in a transaction valued at $40.5 billion. Upon closing, Allergan will receive $33.75 billion in cash and shares of Teva valued today at $6.75 billion, representing an estimated under 10 percent ownership stake in Teva, with the number of Teva shares determined based on Teva’s volume weighted average trading prices during the 15 days prior to the announcement and five days following the announcement.

Headquartered in Israel, Teva is the world’s largest generic medicines producer, leveraging its portfolio of more than 1,000 molecules to produce a wide range of generic products in nearly every therapeutic area. Teva believes the acquisition will be significantly accretive to non-GAAP EPS, including expected double-digit non-GAAP EPS accretion in 2016 and more than 20 percent accretion in year two and year three following the close of the transaction. The transaction was unanimously approved by the Boards of Directors of Teva and Allergan and is expected to close in the first quarter of 2016.

This strategic acquisition brings together two leading generics businesses with complementary strengths, brands and cultures, Teva said in a statement, providing patients with more affordable access to quality medicines, and creating significant financial benefits for Teva stockholders. The transaction will create a leader in the INN and branded generics industry with an overall product portfolio that leads the industry in terms of differentiation and durability and offers promising growth opportunities, the statement read. The new Teva will further transform the global generics space through its best-in-class generics pipeline, R&D capabilities, operational network, supply chain, global commercial deployment and infrastructure to achieve greater efficiencies across the healthcare system and provide patients and consumers across the globe with better access to high quality affordable medicines.

“This transaction delivers on Teva’s strategic objectives in both generics and specialty,” said Erez Vigodman, president and CEO of Teva. “Through our acquisition of Allergan Generics, we will establish a strong foundation for long-term, sustainable growth, anchored by leading generics capabilities and a world-class late-stage pipeline that will accelerate our ability to build an exceptional portfolio of products – both in generics and specialty as well as the intersection of the two. Our respective portfolios of generic medicines and applications are highly complementary, providing Teva with high quality growth and earnings visibility, and the scale and resources to expand upon our specialty capabilities.”

Under the agreement, Teva will acquire Allergan's legacy Actavis global generics business, including the U.S. and international generic commercial units, third-party supplier Medis, global generic manufacturing operations, the global generic R&D unit, the international over-the-counter (OTC) commercial unit (excluding OTC eyecare products) and some established international brands.

Allergan will retain its dynamic global branded pharmaceutical and medical aesthetic businesses, as well as its biosimilars development programs and the Anda distribution business. "This transaction will accelerate Allergan's evolution into a branded Growth Pharma leader, enable a sharpened focus on expanding and enhancing our global branded pharmaceutical business and strengthen our financial position to build on our proven track-record of value creation led by effective capital deployment," said Brent Saunders, CEO and president of Allergan.

"Allergan expects to have 2015 pro forma sales of approximately $15.5 billion, a simplified operating model and a strong position in seven therapeutic areas, including Eye Care, Gastroenterology (GI), Aesthetics, Women's Health, CNS, Urology and Anti-infectives. Allergan will have a simplified manufacturing network of 12 plants globally, an industry-leading mid-to-late-stage R&D pipeline with 70 projects and a global commercial operating model engineered to drive double-digit branded product sales with compelling profit margin.

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