On Monday, Teva Pharmaceutical Industries Ltd. said that it would acquire generics unit of Allergan for $40.5 billion in cash and stock. It will be done under a deal that will be a leap for Israeli company, when it comes to the top ranks of drug makers in the world.

As per Teva, Allergan would be getting $33.75 billion in cash. This agreement is the latest, when consolidation in the drug industry is on peak. Teva is the largest generic-drug company by sales in the world, and is also the third- largest competitor in the drug market.

As per reports, with this acquisition, Teva's sale will increase in the highly competitive generic-drug market. It will also be a chance to go for additional cost reductions that could assist in dealing with the end of patent expirations.

Teva Chief Executive Erez Vigodman said that the transaction is helpful for strategic objectives of Teva in both generics and specialty. Teva said in a separate statement that because of the Allergan deal, it would be cancelling its deal for competitor Mylan NV.

Teva shares increased more than 11% after announcement of the deal. According to the company, it is looking forward to acquire Allergan Generics to make a contribution of $2.7 billion in earnings prior to taxes, amortization and depreciation.

According to Allergan CEO Brent Saunders, "We will have the potential to add scale in existing therapeutic areas, expand into new therapeutic areas and geographies and evaluate strategic transformational deals as we continue to build on our position as the most dynamic branded growth pharma company".