Mallinckrodt Pharmaceuticals and Endo Inc. are exploring a potential merger that could be valued at about $7 billion, people with knowledge of the matter said.

Ireland’s Mallinckrodt will buy U.S. drugmaker Endo in a cash-and-stock deal valued at $6.7 billion. The companies said Thursday that Endo shareholders will receive a total of $80 million in cash and own nearly 50% of the combined company.