Chemical and pharmaceutical company Solvay SA (SOLB.BT) confirmed Monday it is selling its drug making activities to U.S. rival Abbott Laboratories (ABT) for a total value of about EUR5.2 billion, as the Belgian conglomerate takes advantage of the drug industry's push for consolidation, while raising cash 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 U.S. pharma company is also assuming EUR400 in liabilities from Solvay, the Brussels-based company 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.

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 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.

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 cyclicality 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.

"In anticipation of future market needs, we are ensuring we have the technologies, products, infrastructure and reach to serve patients globally and continue to deliver sustainable industry-leading growth," said Abbott's Chief Executive Miles D. White in the statement.

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

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.

Abbott outbid Swiss drug company Nycomed, which had been pursuing Solvay's drug business. Nycomed, owned by private-equity firms, was widely expected to win the auction before Abbott came on strong in recent weeks.

Solvay shares closed at EUR74.73 on Friday. They have gained 41% since the beginning of the year, with most of the gains coming after it announced the sale of the pharma unit.

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

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