Alliance Boots and US pharmacy giant Walgreens are set to form a strategic partnership that will make it the “global leader in pharmacy and health retailing” with more than 11,000 stores in 12 countries.

Walgreens will initially invest $6.7bn in cash and stock to acquire 45% equity in Alliance Boots with a view to merge within three years. The deal is scheduled to be completed by September 1.

Alliance Boots co-owner and executive chairman Stefano Pessina has been vigorously seeking an American partner in order to help fulfil his ambition of creating a truly global business.

Walgreens will have the option to fully merge by purchasing the remaining 55% of Alliance Boots in three years’ time. At the current share price the second purchase would be £9.5bn of cash and stock, also taking on the debt at that time.

Both companies will continue to trade under their current brand names but once the second transaction is carried out “the name of the new combined entity will reflect the strong heritage of both companies”.

There are no redundancy plans across either companies asa a result of the partnership.

Once the initial transaction has been completed Pessina will join the Walgreens board of directors. Alliance Boots co-owner private equity firm KKR director Dominic Murphy will also join the Walgreens board. Both Pessina and KKR will hold a significant stakes in Walgreens.

The board of directors at Alliance Boots will expand to include Walgreen’s president and chief executive officer Gregory Wasson, executive vice president and chief financial officer Wade Miquelon, executive vice president and general counsel Thomas Sabatino, and senior vice president and chief strategy officer Robert Zimmerman.

Walgreens expects the alignment between the two companies to save between $100m and $150m in the first year and $1bn by the end of 2016.

The most significant short-term and long-term opportunities are increased buying power, incuding prescription drugs, front-of-store purchasing and indirect spend and revenue synergies due to introducing Alliance Boots product brands to Walgreens and Duane Reade stores. The will also share best practices, particularly in pharmacy operations health and wellness services and logistics.

Alliance Boots executive chairman Stefano Pessina said: “This strategic transaction represents a further vital step in achieving our vision of becoming a global healthcare leader.

“We believe that it will bring clear benefits to all stakeholders, creating significant and sustainable industrial value through synergies and the deployment of our joint expertise.”

Pessina added that the deal is a “natural” fit because the Walgreens consumer profile is similar to that of Boots in the UK, viewed as a trusted and “much-loved” pharmacy brand with strong heritage.

Pessina added: “Our pharmaceutical wholesale businesses will provide their logistics know-how to Walgreens and are well placed to be one of the growth engines of the new enterprise.

“I strongly believe that this transaction offers further significant growth opportunities and marks a very positive milestone for the healthcare industry as a whole.”

Walgreens president and chief executive Gregory Wasson added he hoped the partnership would expand services in existing markets and becoming the “health and wellbeing partner” of choice in emerging markets.

“We are looking forward to working with Alliance Boots to leverage our combined strengths and provide an even broader range of innovative, cost-effective products and services to patients and customers across the healthcare landscape,” Wasson said.

Alliance Boots in game-changing tie up with US giant Walgreens