GENEVA --
The Swiss pharmaceutical giant said integrating the two companies into its Sandoz division would create the world's largest generic drug company.
The move also positions Sandoz for growth in the United States when millions more people qualify for Medicare prescription drug benefits next January under a change approved by Congress at the end of 2003.
Novartis said it will buy all of privately held Hexal and the two-thirds of Eon Labs that the German company owns for roughly $7.3 billion. Novartis also expects to spend close to $1 billion for the remaining Eon shares. The company will offer $31 each for the remaining Eon Labs shares, which closed Friday at $27.92 on the Nasdaq Stock Market. The Nasdaq was closed yesterday for Presidents' Day.
With the acquisitions, Sandoz would supplant Israel's Teva Pharmaceuticals Inc. as the largest company specializing in generic versions of drugs that have lost patent protection. Teva had sales of $4.8 billion last year. Including Eon and Hexal, Sandoz would have had 2004 sales of $5.1 billion.
''The acquisitions of Hexal AG and Eon Labs will significantly strengthen our geographic presence and product portfolio, our development and registration capabilities, and increase our scale to rapidly bring a broad array of generic products to patients," said Daniel Vasella, chairman and chief executive of Novartis.
Novartis shares rose nearly 3 percent yesterday, closing at 58.85 Swiss francs ($49.71) on the Zurich exchange.
Basel-based Novartis said it expects annual cost savings of $200 million within three years after the deals close, with half in the first 18 months.
The company, one of the world's largest drug makers, said there would be ''necessary reductions in the workforce" but offered no details and said it also expected the deal to create some jobs.
Hexal, one of the largest generic pharmaceutical companies in Germany, had sales of $1.65 billion last year and employs about 7,000 people. Eon Labs reported 2004 sales of $431 million and has about 500 employees.