Shares in King Pharmaceuticals ( KG) surged Monday after the struggling company agreed to be acquired by generic drugmaker Mylan Laboratories ( MYL) in a $4 billion stock swap deal. Under terms of the deal, King shareholders will receive 0.9 Mylan common shares for each share they own. Based on the closing price of Mylan's stock on July 23, that values King shares at $16.659 each -- about a 60% premium. Bristol, Tenn.-based King's shares have plummeted this year because of questions about inventory management controls and a number of management changes. King shares closed at $10.34 Friday, but jumped $4.66, or 45%, to $15.03 in premarket trading Monday. Mylan shares ended at $18.51 Friday, just 30 cents above their 52-week low. "This transaction combines the number one domestic generic pharmaceutical company and a leading branded specialty pharmaceutical company with highly complementary platforms, and creates the second largest pharmaceutical company based on the number of U.S. prescriptions dispensed," Mylan said in a statement. Pittsburg-based Mylan singled out King's "experienced cardiovascular sales force," which markets Altace, a leading ACE inhibitor for hypertension and cardiovascular protection. Altace had $450 million in sales for the 12 months ended March 31, 2004. The acquisition will be approximately 15% accretive on a cash EPS basis, the companies said. Upon completion of the deal, current Mylan shareholders will own approximately 56% of the company. The transaction is anticipated to close by the end of 2004. Mylan Monday also reported lower first-quarter earnings. The company earned $82 million, or 30 cents a share, vs. $83.9 million, or 30 cents a share, in the year-ago period. Revenue rose to $339.0 million, up $7.6 million from a year ago. The consensus estimate was 26 cents a share, according to Thomson First Call. King, which will report quarterly results August 5, posted earnings that fell far short of analysts' estimates in the first quarter, when the company had net income of $25.9 million, or 11 cents a share, on revenue of $290.6 vs. $82.3 million, or 34 cents a share, on revenue of $338.4 million a year ago. But including items, King's loss ballooned to $111.1 million, or 46 cents a share, from $7.2 million, or 3 cents a share, a year ago. King recently signed inventory management agreements with three firms.