Lannett's shares jumped about 17 percent in extended trading on Wednesday.
There have been several large deals involving generic drug makers, including industry leader Teva Pharmaceutical Industries Ltd, this year as companies look to gain scale.
Kremers Urban has 18 generic drugs in the market for conditions including attention deficit hyperactivity disorder, hypertension and respiratory disease.
The company also has 11 drug applications pending approval from the U.S. Food and Drug Administration and 17 drug candidates in development.
Lannett said on a conference call that Kremers Urban was expected to add about $235 million-$245 million to its revenue in the year ending June 2016. Lannett reported net sales of $406.8 million for the year ended June 30.
The deal, which also includes potential contingency payments, is expected to add to Lannett's adjusted profit from 2016.
With the acquisition, Lannett is "creating a speciality pharmaceuticals company that has substantial size, scale and reach," Chief Executive Arthur Bedrosian said.
The deal follows Israel-based Teva's $40.5 billion acquisition of Allergan Plc's generic drugs business and Jordan-based Hikma Pharmaceuticals' purchase of Boehringer Ingelheim's U.S. generic drugs unit for about $2.65 billion in July.
UCB had reached an agreement to sell Kremers Urban to private equity groups Advent International and Avista Capital Partners for about $1.53 billion in November, but the deal fell through in December.
Bloomberg reported in June that India's Lupin Ltd and Cipla Ltd were among the bidders for Kremers Urban.
Lannett said on Wednesday it planned to fund the acquisition through a combination of term loans and cash on hand.
Morgan Stanley and RBC Capital Markets, the company's financial advisers for the deal, have provided committed financing of up to $1.29 billion, it said.
Debevoise & Plimpton LLP and Fox Rothschild LLP are Lannett's legal advisers and Roth Capital Partners LLC is the adviser to the company's board.
Lannett's shares were trading at $57.85 after the bell.
Up to Wednesday's close, the stock had risen about 14 percent this year.
(Reporting by Yashaswini Swamynathan and Samantha Kareen Nair in Bengaluru; Editing by Kirti Pandey)
By Samantha Kareen Nair and Yashaswini Swamynathan