The deal, the largest in Israel's corporate history, allows Teva stronger economies of scale, crucial in the low-margin generic drugs business. Teva, which dropped its hostile pursuit of Mylan, will likely have to sell off some drugs to allay antitrust concerns.
"Allergan's business is more high-end (than Mylan). It's a more interesting business ... a profitable business and it's well managed," said Gilad Alper, an analyst at brokerage Excellence Nessuah.
Allergan, known for its Botox anti-wrinkle treatment, became the third-largest generic drugmaker in the United States after combining with Actavis in March. It is seen as a better fit than Mylan because it will improve Teva's distribution channels and access to profitable injectable drugs.
Pressure has been growing on Teva Chief Executive Erez Vigodman to find new revenue sources to combat generic competition for its branded multiple sclerosis drug Copaxone. Copaxone accounts for about half of Teva's profit.
Allergan Chief Executive Brent Saunders, who led Actavis' purchase of Forest Laboratories and then Allergan, said the company will use the $36 billion in net proceeds from the generics sale to help fund further large acquisitions.
"We can accelerate our timing on transformational M&A," Saunders said during a conference call. He cited aesthetics, eye care, central nervous system disorders and gastrointestinal therapies as areas for potential future deals. Wall Street analysts speculated that possible targets include Biogen Inc, Amgen Inc and AbbVie Inc.
The healthcare sector has seen an unprecedented wave of deals since early 2014, from large drugmakers buying up smaller rivals, to consolidation among makers of generic medicines and tie-ups between insurers.
Global healthcare M&A reached $398.5 billion as of July 23, up 80 percent on a year ago, according to Thomson Reuters data.