Mylan N.V. and Pfizer Inc. have agreed to combine Mylan with Upjohn, Pfizer’s off-patent branded and generic established medicines business, based out of Kalamazoo, Mich., creating a new global pharmaceutical company. The strategic deal puts together Mylan’s pipeline and supply chain and Upjohn’s commercial and medical infrastructure and expertise, in order to serve more than 165 markets.

The all-stock combination will be affected through a Reverse Morris Trust, under which Upjohn is expected to be spun off or split off to Pfizer’s shareholders and simultaneously combined with Mylan. Each Mylan share will be converted into one share of the new company. Pfizer shareholders would own 57 percent of the combined new company, and Mylan shareholders would own 43 percent. The boards both Mylan and Pfizer have unanimously approved the transaction.

The transaction is anticipated to close in mid-2020, subject to approval by Mylan shareholders and customary closing conditions, including receipt of regulatory approvals. No vote is required by Pfizer shareholders.

Upjohn will issue $12 billion of debt at or prior to separation, with gross debt proceeds retained by Pfizer. The new company will have approximately $24.5 billion of total debt outstanding at closing.

The new company is expected to have pro forma 2020 revenues of $19 billion to $20 billion. Pro forma 2020 adjusted EBITDA is anticipated to be in the range of $7.5 billion to $8 billion, including phased synergies of approximately $1 billion annually to be realized by 2023. Pro forma free cash flow for 2020 is expected to be more than $4 billion.

The new company will be focused on returning capital to shareholders, while maintaining a solid investment grade credit rating. It expects to achieve a ratio of debt to adjusted EBITDA of 2.5x by the end of 2021. In addition, the new company intends to initiate a dividend of approximately 25 percent of free cash flow beginning the first full quarter after close and the potential for share repurchases once the debt to adjusted EBITDA target is sustained.

The new company, which will be renamed and rebranded at close, will be led by Mylan’s current Chairman Robert J. Coury, who will serve as executive chairman of the new company. current Upjohn Group President Michael Goettler will serve as CEO, and current Mylan President Rajiv Malik will serve as president. Current CFO of Mylan Ken Parks has agreed to depart the company. Mylan’s current CEO Heather Bresch will retire upon closing.

The new board will include its executive chairman, and CEO, as well as eight members designated by Mylan, and three members designated by Pfizer. The new company will operate global centers in Pittsburgh, Shanghai, China, and Hyderabad, India.