Teva, a worldwide leader in generic pharmaceuticals, is buying Allergan PLC for $40.5 billion. Allergan PLC will receive $33.75 billion cash and shares of Teva that was valued $6.75 billion, representing the 10% Teva's ownership stake.

Teva's official website states that the company had signed an agreement with Allergan PLC upon purchasing the generic company for $40.5 billion. This is the biggest acquisition in Israel's business history given that Teva is the world's largest generic drug manufacturer.

Forbes considers the deal to lead to a high quality and affordable generic and branded medicines.

In a statement, Erez Vigodman, Teva's President and CEO said the acquisition of Allergan generics will establish a strong foundation for long-term, sustainable growth of the company.

Both companies' leading generics capabilities and a world-class late-stage pipeline will help accelerate the ability to build an exceptional portfolio of products both in generics and specialty as well as the intersection of the two.

"We look forward to delivering the benefits of this transaction to our stockholders, and better serving patients, customers and healthcare systems throughout the world", Vigodman enthused.

Brent Saunders, Allergan plc CEO and president said the agreement will help them advance in the global market and will stabilize the company financially.

Recently, the shortage in manufacturing of generic medicines and lack of competition leads the generic drugs' price to rise in which they are supposed to be cheaper than branded ones.

Teva believes that major generic drug companies must merge to be more resourceful to save on costs. The merging will improve the productivity of drug manufacturers by reducing labor force and other overlying costs of the two organizations.

It would also increase the authority in transacting between insurers and payers, especially in markets like the United States where businesses restrict costing due to inflation.

Teva Pharmaceuticals Industries Limited is the widest drug maker founded in 1901 in Jerusalem selling imported medicines in wholesale and started producing its own in 1930, cited on the Teva site.

The company's persistent growth leads to global acquisitions. It took over Ivax in 2005 and Barr Pharmaceuticals in 2008, both for $7.4 and had also become major deals in Israel that time. They also worked out on branded medicines such as Copaxone, a medicine for treating multiple sclerosis and Azilect, a medicine for Parkinson's disease.

Teva's move is somewhat strategic. Being Isreal's source of pride for so many years, it can encourage companies on small countries to do the same.