Updated from 8:40 a.m.

Drug distributors

AmeriSource Health

(AAS)

and

Bergen Brunswig

(BBC) - Get Report

will merge in a stock-for-stock deal worth $2.4 billion, creating a new company, called AmeriSource-Bergen, the companies said Monday.

The combined company, with about $35 billion in annual operating revenue, is expected to achieve annual cost savings of more than $125 million by the end of the third year. About $10 million in annual expenses related to purchase accounting adjustments are anticipated, but the companies expect the adjustments to be offset by the elimination of $23 million a year of goodwill amortization for the new company.

Under the terms of the agreement, unanimously approved by both boards of directors, each share of Bergen Brunswig common stock will be converted into 0.37 shares of AmeriSource-Bergen common stock, while each share of AmeriSource common stock will be converted into one share. The new company will have about 103 million shares outstanding, with current AmeriSource shareholders owning about 51% of the combined company and Bergen Brunswig shareholders owning about 49%. Based on closing stock prices on March 16, the new company will have a pro forma market capitalization of about $5 billion and about $2 billion of debt.

The transaction, scheduled to close this summer, is not expected to dilute earnings before synergies and special items. The deal is subject to regulatory review and approval by shareholders of AmeriSource and Bergen Brunswig.

Robert Martini, chairman and CEO of Bergen Brunswig, will become chairman of the combined company, while R. David Yost, AmeriSource's chairman and CEO, will become CEO and president.

Shares of AmeriSource closed Friday at $48.48, and have a 52-week range of $1.419 to $57.97. Shares of Bergen Brunswig closed Friday at $15.94, and have a 52-week range of $4.88 to $20.40.