This post has been updated:

Walgreen Co. announced this morning that it would acquire Bellevue-based drugstore.com in a transaction worth $429 million.

As part of the merger, which was unanimously approved by drugstore.com's board, the company will acquire the drugstore.com website, along with other company websites, like Beauty.com and VisionDirect.com. Drugstore.com shareholders still must approve the acquisition, but the deal is set to close in June of 2011.

Drugstore.com had sales of $456 million in 2010. The company employs 1,000 people at its offices, call center and distribution centers and Walgreens said it will maintain drugstore.com's corporate office in Bellevue. (Is Drugstore.com worth the price?)

Drugstore.com’s stock rose 111 percent on the news, going up $1.99 this morning to $3.78 a share.

NYT’s DealB%k blog notes that drugstore.com’s revenue was $456 million in 2010, so Walgreens is paying less than a year’s sales for the ecommerce company.

Drugstore.com CEO Lepore to speak at TechFlash event

Drugstore.com CEO and Chairwoman Dawn Lepore said the company would benefit from the transaciton and "our growth strategies are perfectly aligned, and Walgreens will be able to accelerate and expand the investments necessary to achieve our vision and growth opportunities."

The merger comes on the heels of AT&T’s proposed purchased of T-Mobile, another Bellevue company. Greg reported yesterday that, “the fear among some experts is that the merger creating the nation’s largest wireless carrier would raise service costs, reduce options for customers and cost jobs at T-Mobile’s Bellevue headquarters.”

What will the impact of the acquisition be on drugstore.com’s 1,000 employees?

We’ve reached out to drugstore.com for comment and will update the post as we learn more.

The acquisition also highlights the recent trend of brick-and-mortar retailers buying ecommerce companies to expand their sales base and tap into technologically savvy consumers.

In February, Nordstrom announced it was purchasing Haute Look, a Los Angeles-based flash-sale site, for $180 million. Nordstrom announced it completed the acquisition of Haute Look Wednesday.

In recent years, Walgreens has stepped up its game to become more technologically friendly. In the last year, it debuted an iPhone app, launched a mobile website and started a text-messaging service to let customers know when prescriptions are ready. The drugstore.com purchase will help the 110-year-old company significantly expand its online reach.

Under the terms of the merger agreement, drugstore.com stockholders will receive $3.80 in cash for each share of stock, which represents an equity value of approximately $429 million. The price per share is a premium of approximately 102 percent over drugstore.com’s 30-day average closing stock price, and a premium of approximately 113 percent over the closing price of drugstore.com’s common stock on March 23, 2011, the last trading day prior to today’s announcement.

“This acquisition offers a unique opportunity that will provide us immediate access to more than 3 million savvy, online loyal customers, and will allow us to move even closer to our existing customers through relationships with new vendors and partners, adding approximately 60,000 products to our already strong online offering," said Walgreens President and CEO Greg Wasson.

A Dallas-based law firm, Kendall Law Group LLP, announced this morning that it was probing the deal for drugstore.com shareholders. The law firm, which frequently seeks to challenge acquisitions on behalf of shareholders, said it wants to find out if drugstore.com’s board negotiated the best deal for shareholders, or should drugstore.com have shopped for a deal that would have provided better value for shareholders.

According a statement released by Shawn Milne, a Janney Montgomery Scott analyst who follows drugstore.com (DSCM), the Walgreens(WAG) deal is strong and appropriately priced:

"We believe the deal is a strong strategic fit, as WAG can leverage DSCM online expertise - especially in beauty & vision, while the combination should enhance WAG's multi-channel capabilities (buy online, pick up in store etc).

"We believe a competing bid is somewhat unlikely (WAG is more progressive online than its retail competitors), while the acquisition price appears a bit low on a revenue/customer basis yet more appropriate on near-term EBITDA (earnings before income, tax, depreciation and amortization)."

Illinois-based Walgreen Co. had 2010 sales of $67 billion and operates 7,689 drugstores across the U.S., the District of Columbia and Puerto Rico.