NEW YORK (

TheStreet

) --

Walgreen

(WAG)

plans to acquire New York-based drugstore chain

Duane Reade

from affiliates of Oak Hill Capital Partners for $1.075 billion.

Walgreen will buy Duane Reade for cash, plus the assumption of debt.

Walgreen, in a statement Wednesday, said the acquisition will give it a leading position in the nation's largest retail and drugstore market. Duane Reade had unaudited net sales of $1.8 billion for the latest 12-month period ending Dec. 26, 2009, and has the highest sales per square foot in the retail drugstore industry nationwide, Walgree said.

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Walgreen expects the deal to close in its current fiscal year ending Aug. 31.

The company expects to achieve synergies between $120 to $130 million in the third year after the transaction closes. Walgreen anticipates the acquisition will be dilutive to per-share earnings in the first 12 months after closing, and accretive in the next 12 months and after.

Duane Reade will continue to operate under its brand name.

-- Reported by Andrea Tse in New York

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