Loblaw, a Canadian supermarket chain, is set to acquire domestic pharmacy chain Shoppers Drug Mart in a cash-and-stock deal worth C$12.4bn ($11.9bn).

As per the definitive agreement, Loblaw will pay 53.9% of the amount in cash, representing a maximum amount of $6.7bn, alongside issuing 46.1% Loblaw common shares.

The deal will create a unique retailer with capabilities in health & wellness and nutrition, and offers Loblaw a considerable footprint in the growing small-urban store sector.

Shoppers Drug Mart will operate as a separate division of Loblaw and expand its product offerings to include Loblaw’s private label and convenience food.

Shoppers Drug Mart president and CEO Domenic Pilla said that the company is delighted to partner with Loblaw to leverage combined strengths.

"For our shareholders, this transaction provides significant and immediate value, as well as the ability to benefit from future upside by virtue of their continued ownership of shares in the combined company," added Pilla.

Loblaw executive chairman Galen Weston said the deal would change the retail landscape in Canada.

"This combination creates a compelling new blueprint for the future, positioning us to capitalize on important trends in society, from the emphasis on health, wellness and nutrition, to the imperatives of value and convenience," Weston added.

The deal is expected to result in annual cost synergies of $300m by year three, phased in evenly over the first three years following closing.

Subject to necessary approvals, the agreement is expected to be executed within six to seven months.