German drug maker Merck KGaA announced Sunday that it is selling its generic drug business to Mylan Laboratories Inc. of the U.S. for $6.6 billion.

The deal frees Darmstadt-based Merck to concentrate on its core pharmaceutical and chemical activities, while allowing Mylan, a generic drug maker based in Canonsburg, Pa., to expand its global reach.

Merck said that the two companies "signed a share purchase agreement whereby Mylan will acquire all Merck Generics companies throughout the world" and it expects the transaction — which requires regulatory approval — to close in the second half of 2007.

Merck said the unit had sales of $2.4 billion and an operating profit of more than $500 million last year.

Merck's generic drug division has nearly 5,000 employees.

"The fit between our two companies is truly outstanding," said Robert J. Coury, Mylan's vice chairman and CEO. He said the Merck unit "provides us with leading positions in many of the world's other key regions" to add to Mylan's strong position in the U.S. market.

The deal follows Mylan's recent acquisition of 71 percent of India-based drug ingredient maker Matrix Laboratories for a little over $700 million.

Merck said earlier this year that it was amenable to a sale of the generics division. India's Ranbaxy Laboratories Ltd. and Iceland's Actavis Group HF publicly expressed interest.

Merck last year chased rival German drug maker Schering, but was outbid by Bayer AG. It then bought Swiss biotech company Serono SA for $14.3 billion in a deal aimed at expanding its range of drugs and its share of the global biotechnology market.

Selling its generics unit would help lower the company's debt following that acquisition. Merck said the unit accounted for 29 percent of its total sales and 28 percent of its operating profit in 2006.

Merck, founded as a pharmacy in 1668, is the oldest pharmaceutical business in the world. It has been entirely separate from New Jersey-based Merck & Co. since the end of World War I and employs some 29,000 people.