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Chemical and pharmaceutical company Solvay SA (SOLB.BT) confirmed Monday it's selling its drug making activities' Abbott Laboratories (ABT) for EUR4.5 billion in cash, as the Belgian conglomerate takes advantage of the drug industry's push for consolidation, while raising money to expand its plastics and chemicals businesses.

Abbott will pay about EUR4.5 billion in cash, with up to another EUR300 million if certain milestones are met between 2011 and 2013. The Abbott Park, Ill., pharmaceutical company is also assuming EUR400 in liabilities from Solvay, raising the total value of the pharma business to EUR5.2 billion, Brussels-based Solvay said in a statement.

"The proceeds from the divestment will be reinvested in external and organic growth with a sharp focus on long term value creation," said Solvay Chief Executive Officer Christian Jourquin, adding that the focus will be on geographical regions that offer strong growth potential.

Abbott executives said the deal will diversify the company's product lineup, expand its presence in emerging markets, beef up its pipeline of experimental drugs and give Abbott an entry into the vaccines market. They also said the deal was attractive financially - Abbott is using cash on hand to finance the purchase and it should add to earnings from the start. And Abbott sees the potential to cut costs in the Solvay business, whose expenses run higher than Abbott's as a percentage of sales.

"This is a significant business that will further diversify sources of our pharmaceutical growth," Abbott Chief Executive Miles White told analysts on a conference call.

This year, Abbott shares have come under pressure due to a deceleration in sales growth for its top product, the Humira treatment for certain forms of arthritis and other conditions.

Abbott hopes the Solvay deal helps alleviate concerns about the company's growth prospects. J.P. Morgan analyst Michasel Weinstein said the deal could spur Abbott shares; the stock was up about 4% pre-market. But Credit Suisse analyst Catherine Arnold was skeptical and said Abbott would still remain dependent on Humira.

Solvay had said in April that it was reviewing options for its pharma activities, as research, development, production and approval of new drugs becomes more complicated and expensive. Some major players in the sector have recently shown a willingness to spend big money on acquisitions, despite the economic downturn. In January, U.S. pharma company Pfizer Inc. (PFE) bought smaller rival Wyeth (WYE) for $68 billion while Merck & Co. (MRK) agreed in March to buy Schering-Plough Corp. (SGP) for $41 billion.

However, the pharma unit has been a cushion for Solvay against the economic downturn in recent quarters because it partially offset a worse performance at its chemicals and plastics businesses, which are dependent on badly hit industries like autos and construction.

Solvay - one of the last remaining big hybrids along with Germany's Bayer AG (BAY.XE) - makes products as diverse as car fuel tanks to soda ash for the manufacture of glass.

The deal with Abbott came as a surprise to many, as privately-owned Swiss drug company Nycomed was until only recently seen as the only bidder for Solvay's drug business. Solvay's shares rose in early trading, but were down 3.1% at EUR72.38 as of 0744 GMT, the worst stock in an overall negative Bel-20 index of shares traded in Brussels. Solvay has gained 36% since the beginning of the year, with most of the gains coming after it announced the sale of the pharma unit.

Analysts saw the total enterprise value of EUR5.2 billion as a bit lower than expected. Still, this isn't a total surprise because Solvay pharma's profitability is slightly lower than that of peer businesses, said Bernard Hanssens, an analyst at Bank Degroof in Brussels. Both Degroof and KBC Securities cut their rating on the stock to accumulate from buy.

Jourquin said that the investment of the proceeds from the pharma sale will target long-term growth in an effort to limit the impact of cycles on the company.

"We are building a new refocus for the group," he said, adding that the company will continue its dividend policy.

The sale of the pharma operations to Abbott marks another sign of the consolidation of the drug industry.

Abbott sees Solvay as a way to expand into emerging markets in Eastern Europe and Asia, where Abbott had limited presence, while adding new drugs for hypertension and Parkinson's disease. It is the biggest deal Abbott has done since 2002 and it will add more than $3 billion in annual sales, most of which will be outside the U.S., the U.S. company said in a statement Monday.

The deal also gives Abbott full control of two drugs for cholesterol and triglycerides that Abbott and Solvay already sell together - Tricor and Trilipix.

Sales of those drugs, howver, could come under pressure if the results of a large U.S.-sponsored patient trial involving Tricor are negative, as some doctors and analysts expect. Also, Tricor could become exposed to generic competition in the next couple of years.

Solvay also sells hormone treatments and has a small flu-vaccine business - a hot area in the drug industry as concern mounts about flu pandemics.

Company Web sites: www.solvay.com/; www.abbott.com/

-By Alessandro Torello, Dow Jones Newswires; +32 2 741 14 88; alessandro.torello@dowjones.com

(Peter Loftus in Philadelphia contributed to this article.)