Israel is making waves in the international drug market. Teva, popularly known as a shoe company but also Israel’s biggest generic drugmaker and the world’s generic market leader, is acquiring the German firm Ratiopharm, thereby acquiring the world’s second largest in the industry. The merger will give Teva an estimated $2.5 billion boost in sales annually.  Teva even beat out well known US firms like Pfizer in chasing the deal.

Teva’s CEO, Shlomo Yanai, is a former army general and in the past headed security delegations to peace talks at Camp David and Wye. Now he’s taking over the business world. Teva’s combined shares in the Israeli stock exchange value approximately $57 billion, and climbed another 4% as a result of the announcement.

The deal is reportedly good for both sides, as Ratiopharm said that this, the biggest takeover of a copycat drugmaker since Teva bought it’s rival company Barr in 2008 — would leave it debt free, and pushes Teva to second place as the generics drugmaker in Europe.

Teva is financing the purchase from $3 billion it has in cash reserves plus $2 billion from credit lines.

The sad part of the story is that the German company was put up for sale when its former owner, Adolf Merckle threw himself in front of a train in January 2009 after ceding control of his company to debtors. Good thing Israel is there to pick up the pieces and see if she can rebuild.

If the merger succeeds, Israels economy will have billions more in cash flow thanks to General Yanai.