Mylan Laboratories Inc. (NYSE: MYL) won over rival bids to agree to buy Merck KGaA's (NYSE: MRK) generic drug division on Sunday for 4.9 billion euros in cash ($6.7 billion).

Mylan competitors for the Merck Generics unit included Teva Pharmaceuticals, the world's largest generic drug maker, and Iceland's Actavis for the business with operations in 90 countries. The combined company will have revenues over 10,000 employees, about $4.2 billion in revenues and earnings of $1 billion, the company said.

Mylan is paying nearly 3 times the sales of the unit's yearly sales, however company executives believe the combined operations will be worth the cost.

The fit between our two companies is truly outstanding, said Robert J. Coury, Mylan's CEO. Merck Generics provides us with leading positions in many of the world's other key regions. Together, we will form a powerful, diverse, robust and vertically integrated generics platform.

The combination will give Mylan generic substitutions for best-sellers such as AstraZeneca Plc's Prilosec ulcer pill and Merck's cholesterol-lowering medicine Zocor.

It also expects to save $250 million three years after the acquisition. The majority of the savings will be from vertical integration of Merk's supply by leveraging its India-based Matrix Laboratories Ltd. generic drug business, aligning research and development, and increasing manufacturing.

The deal will start contributing to earnings after two years, Mylan said.

In early trading, shares of Merck rose 57 cents, or 1.1 percent, too $52.57.

Shares of Mylan were unchanged in early trading, steady at $22.40 on the New York Stock Exchange.