American drug store chain Walgreens and Alliance Boots are to merge following a $6.7bn deal.

Walgreens has bought a 45% stake in Alliance Boots with the option of buying the rest of the chain within three years. It will invest $4bn in cash with the rest put into shares.

Alliance Boots was valued at $15.6bn as a result of the merger and the deal has been unanimously approved by the boards of both companies.

Following the merger, the group will own more than 11,000 stores across 12 countries and will be the largest global pharmaceutical wholesale and distribution network with approximately 370 distribution centres delivering to more than 170,000 pharmacies, doctors, health centres and hospitals across 21 countries.

As a result of the deal, Alliance Boots says the company could save up to $1bn a year by 2016. Initial reaction among investors does not appear optimistic with Walgreens share prices falling by 6% over fears that the deal is too ambitious.

Boots merged with European drugs wholesaler and distributer Alliance UniChem in 2006 to help the chain grow a stronger international presence beyond its UK homeland. The company’s executive chairman Stefano Pessina and private equity firm KKR then took the firm private in 2007 with a buy-out worth $22.2bn.

Pessina has claimed he will take no money out of the Walgreens deal, instead re-investing in Walgreens shares and taking an 8% stake in the American chain.