Generic drug maker Mylan Laboratories Inc. (MYL) is buying branded drug maker King Pharmaceuticals Inc. (KG) for about $4 billion in stock, company officials said Monday.

Mylan has pursued a stronger position in the branded drug market and believes King can accelerate that goal.

"The significant expansion of our branded business advances our long-term strategy," said Robert J. Coury, Mylan's vice chairman and chief executive officer.

Bristol, Tenn.-based King and Mylan, which is based in Pittsburgh, will create a company with combined annual revenues of about $3 billion and a work force of 6,000 people.

King's flagship product is Altace (search), which is used for hypertension and cardiovascular protection. Altace had sales of about $450 million for the 12 months ended March 31.

Generic drug companies like Mylan, Teva Pharmaceuticals (TEVA) , Forest Laboratories and others have seen their sales surge as employers try to cut soaring health care costs.

Yet many of those sales were driven by the expiration of patents on high-margin branded pharmaceuticals, which will slow considerably in the coming years in line with fewer expired patents.

King Pharmaceuticals has pushed aggressively for an entry into the branded market with one division devoted to the acquisition of name brands and companies.

King has also built an extensive sales and marketing program, an attractive asset to Mylan.

Mylan has its own subsidiary that markets branded pharmaceutical drugs, Mylan Bertek Pharmaceuticals Inc. Earlier this month Mylan Bertek had nebivolol, its branded hypertension drug, accepted for review by the Food and Drug Administration (search).

Under terms of the definitive agreement, King stockholders would get 0.9 Mylan common shares for each outstanding share of King stock. That would give King shareholders stock worth $16.66 for each of their shares, based on Friday's closing price for Mylan shares. That represents a 60 percent premium over King's closing price on Friday.

Upon completion of Mylan's acquisition of King, current Mylan shareholders will own approximately 56 percent of the outstanding common shares of Mylan, and King shareholders will own approximately 44 percent.

The deal requires shareholder and regulatory approval but is expected to close by the end of the year.

King has been the subject of a Securities and Exchange Commission (search) investigation concerning pricing practices for government programs such as Medicaid. Jefferson J. Gregory, the chief executive officer and chairman, and Kyle P. Macione, president, resigned earlier this year.

Mylan on Monday also reported first-quarter results, earning profits of $82 million, or 30 cents per share, compared with $83.8 million, or 30 cents per share, during the same period last year.

The company reported record net revenues of $339 million, up just over 2 percent compared with the first quarter last year.