The combined company would be called Alliance-Boots and be one of Europe's largest distributor and retailer of drugs, healthcare and beauty products.
The merger has been billed as one 'of equals' and is now subject to shareholder and regulator approval. It is estimated that the combined company will have sales in excess of£13 billion.
The merger would give Boots a greater brand profile in Europe and a platform for expansion outside of the UK.
Today's announcement comes just days after Boots chief executive Richard Baker said of future trading conditions: 'We see no sign that the market will get any easier for the rest of the year.'
Some have interpreted his remark as a veiled profit warning. However, Baker is expected to remain at the helm of the new company and it is proposed that Boots chairman Sir Nigel Rudd will chair the combined group. Stefano Pessina, Alliance Unichem's deputy executive chairman, will take the same role at the new group.
The deal will enable the group to compete harder against the likes of Tesco and Asda. Today supermarket retailers sell more counter medicine and toiletries than pharmacies.
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