UPDATE: Walgreen To Buy Online Retailer Drugstore.com For $429 Million

Walgreen Co. (WAG) agreed to buy online retailer Drugstore.com Inc. (DSCM) for about $429 million in cash, adding to the largest U.S. drug retailer's online portfolio.

Shares of Drugstore.com, which has never posted a full-year profit, more than doubled to $3.80 on record volume early Thursday, matching the per-share offer price. Walgreen was off 0.2% to $39.77. Drugstore.com last traded above the offer price in May; its shares have fallen 53% in the past 12 months.

The offer represents a 112% premium over Wednesday's close. The companies said the deal has an enterprise value of about $409 million.

Walgreen said it expects the acquisition to shave about 3 cents a share off its fiscal fourth-quarter earnings and another 3 cents to 4 cents and 1 cent to 2 cents in fiscal 2012 and 2013, respectively.

Walgreen expects to fund the acquisition with existing cash and, subject to regulatory approval, sees it closing in June. Drugstore.com's board unanimously backed the deal.

Drugstore.com, which operates its namesake website as well as Beauty.com, SkinStore.com and VisionDirect.com, posted $456 million in sales last year, making it the eighth-largest e-tailer in the U.S., according to Internet Retailer magazine.

Walgreen completed its biggest acquisition ever less than a year ago, buying New York drugstore chain Duane Reade in April for about $620 million in cash and $480 million in assumed debt.

Walgreen spokesman Michael Polzin said the company is "on schedule, on track" with the Duane Reade integration, which includes 258 stores in the New York City area. "We are doing store systems integrations right now and will be doing remodeling of the stores," he said.

Tuesday, Walgreen posted fiscal second-quarter results above analyst expectations. The company posted per-share earnings of 80 cents, up from 68 cents in the prior-year period. Both periods included 2 cents a share in restructuring costs. Sales for the quarter ended Feb. 28 increased 8.9% to $18.5 billion.

Earlier this month, Walgreen agreed to sell its pharmacy benefit management business to Catalyst Health Solutions Inc. (CHSI) for $525 million. That deal is expected to close in the coming months.

-By Melissa Korn, Dow Jones Newswires; 212-416-2271; melissa.korn@dowjones.com

--Drew FitzGerald contributed to this article.

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