By Emily Church,MarketWatch

NEW YORK – In a move that will unite two of the world’s largest generic drugmakers, Israeli company Teva Pharmaceutical Industries Ltd. said Monday it would pay $7.4 billion to acquire Ivax Corp.

The terms, backed by boards of both companies, offer shareholders of Ivax $26 a share in cash, representing a 13.6 percent premium to the stock’s price Friday. Alternatively, Ivax holders can take stock in Teva’s New York-listed shares at a rate of 0.847 per Ivax share.

In morning trading on Wall Street, shares of Miami-based Ivax rose 13 percent to $25.91. Teva’s stock rose 4.4 percent to $32.55.

“We have always viewed Ivax as one of the most attractive and the most compelling strategically,” chief executive Israel Makov told investors and analysts on a conference call. “This acquisition is another major step forward in the execution of our strategy.”

As of the end of last week, Ivax shares had surged 45 percent year to date.

In acquiring Ivax, Teva would attain a leading franchise in respiratory products, an emerging oncology business and a “promising pipeline,” Makov said.

Analysts expect Ivax sales this year to reach $2.2 billion, and then $2.7 billion in 2006, according to Thomson First Call. Most of its proprietary products treat respiratory problems and are based on its inhalation-based technology.

Combined, the two companies expect to generate sales of more than $7 billion a year.

The deal, expected to close by early next year, requires antitrust clearance by U.S. and European regulators. Ivax executives told analysts that while the potential exists that the regulators will look at product lines, Ivax feels “very good about the complementary nature of both the product line and the pipeline.”

Cost savings are expected to reach $150 million at the end of two years from the deal’s close. Executives said the combination of the companies would add to earnings within the first year of the deal being completed.

Teva will see the U.S. market importance diminish slightly by acquiring Ivax. The United States is expected to generate 59 percent of sales for the combined companies with some 300 products. Currently, Teva generates 64 percent of its sales in the U.S. market.

While not a significant change, the difference highlights where Teva is seeing faster growth this year – in overseas markets.

In the generics business, Ivax and Teva compete with Mylan Laboratories Inc. Shares of Mylan were up 12 cents, or 0.7 percent, at $17.64.

Earlier this year, Teva cautioned investors of challenges it faces in the U.S. market, a result of fewer product opportunities. Makov on Monday said Teva still expects earnings this year to come within the range of the company’s previous forecasts, but that he expects “it to be rather on the low side than the high side because of the continued lack of product opportunities” in the United States.

Makov added that Teva seen a “strong performance” in its generics business outside of the United States.

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