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Walgreen buying large stake in European chain

Walgreen Co. (WAG) will pay $6.7 billion in cash and stock to buy a stake in European health and beauty retailer Alliance Boots in the first international venture for the largest U.S. drugstore chain.

The Illinois-based company plans to initially spend about $4 billion in cash and contribute more than 83 million shares for a 45 percent ownership stake in Swiss-based Alliance Boots, which runs more than 3,300 health and beauty retail stores in 11 countries. It also has a pharmaceutical wholesale business that supplies pharmacies, doctors and other health care providers in 21 countries.

Walgreen has an option to buy the rest of Alliance Boots in about three years in a deal valued at around $9.5 billion based on Walgreen's share price and the current exchange rate. The drugstore chain's shares closed at $31.96 on Monday and climbed to $32.20 Tuesday in premarket trading.

Walgreen expects the purchase of the initial stake to be completed by September. It operates 7,890 drugstores.

Walgreen operates nearly 7,900 stores in all 50 U.S. states.