German pharmaceutical and chemicals firm Merck is to sell its generic drugs unit to US group Mylan Laboratories for 4.9bn euros ($6.6bn; £3.3bn).

The cash deal, which is subject to regulatory approval, is likely to be completed in the second half of 2007.

The generics unit ranks fourth in the world in terms of sales, which came in at 1.8bn euros in 2006.

The sell-off follows Merck's recent 10.6bn euro takeover of Swiss biotech firm Serono.

The German firm said it would use some of the proceeds of the sale to reduce its debts and offer a special dividend to investors.

The sale "will allow Merck to focus its resources on further growth within its pharmaceuticals and chemicals business sectors," chief executive Karl-Ludwig Kley added in a statement.

Mylan added that the buy would be an "outstanding" fit with its own businesses, adding that it would provide the firm with "leading positions in many of the world's other key regions" which would boost its strong position in the US.

Using 2006 figures, the combined business would have revenues of $4.2bn and gross profit of $1bn, Mylan said.

The deal follows Mylan's recent $736m acquisition of a 71.5% stake in Indian-based drug ingredient maker Matrix Laboratories.

Matrix makes active pharmaceutical ingredients for generic drug firms and the acquisition allowed Mylan to target emerging markets in India, China and Africa.