Walgreen Co. is buying a 45% stake—valued at $6.7 billion—in Alliance Boots GmbH, a European pharmacy and health products retailer.

The agreement also gives Walgreens an option to buy the remaining 55% of Alliance Boots for $9.5 billion after three years. In fiscal 2011, Walgreens had revenue of $72.2 billion in sales and Alliance Boots had revenue of 25.4 million euros ($32.3 billion). Walgreens forecasts the deal will generate combined revenue of approximately $130 billion by 2016.

Combined, Walgreens and Alliance Boots will have more than 11,000 stores in 12 countries, Walgreens says. Walgreens currently has no stores outside the U.S. Boots sells its No7 and Botanics health and beauty products in more than 1,750 Target stores and online at Target.com, drugstore.com, Beauty.com and on ShopBootsUSA.com. Additionally, No7 is sold at almost 450 Ulta Salon, Cosmetics and Fragrance Inc. stores and via Ulta.com. Walgreens bought Drugstore.com about a year ago in a $429 million deal.

Walgreens is No. 33 in the Internet Retailer Top 500 guide, Ulta is No. 337 and Alliance Boots is No. 99 in the Internet Retailer Top 400 Europe.