DEERFIELD, Ill. — Walgreen Co. plans to buy metropolitan New York drug chain Duane Reade in a deal valued at nearly $1.1 billion.

Under the deal announced Wednesday, Walgreens will acquire Duane Reade from affiliates of its parent company, private equity firm Oak Hill Capital Partners, in a transaction with a total value of $1.075 billion, inlcuding the assumption of debt.

The deal includes all 257 Duane Reade stores in the metro New York area as well as the corporate office and two distribution centers. Walgreens said it will fund the purchase with existing cash and expects the agreement to close when its current fiscal year ends Aug. 31.

“Duane Reade is a compelling strategic acquisition that will immediately provide Walgreens with a leading position in the largest drugstore market in the U.S.,” Walgreens president and chief executive officer Greg Wasson said in a statement. “In addition, Duane Reade’s recent initiatives in urban retailing, customer loyalty and private brand products support and accelerate Walgreens strategy to enhance the customer experience in our network of more than 7,100 stores across the country.”

Plans call for Duane Reade to continue to operate under its brand name after the transaction closes, according to Walgreens. The Deerfield, Ill.-based chain, which has 7,162 stores nationwide, said it operates 70 stores in the New York City area and that over time decisions will be made on “the best, most effective way to harmonize the Walgreens and Duane Reade brands.”

Walgreens added that it expects to retain Duane Reade’s store, pharmacy and distribution center employees and many members of its senior management team after the acquisition, and that over time consolidation of core functions at the corporate offices will occur.

Duane Reade had unaudited net sales of $1.8 billion for the latest 12-month period ended Dec. 26, and the chain has the highest sales per square foot in the retail drug store industry, the companies said.

“We are very pleased that this national leader has recognized the successful transformation under way at Duane Reade, which is built upon a 50-year history of serving the needs of New Yorkers and has been supported by our shareholders, including Oak Hill Capital Partners,” Duane Reade chairman and CEO John Lederer said in a statement. “We will continue to be the drug store New Yorkers turn to, just as Walgreens has been a trusted community pharmacy in other markets for more than 100 years.”

For Walgreens, the deal continues a strategy of making acquisitions in areas where it can fill out its store base or immediately become a market leader.

Late last month, Walgreens unveiled agreement to buy three Farmacias El Amal stores in Puerto Rico as well as prescription files from 11 other El Amal pharmacies. About a week before the latest El Amal deal, Walgreens announced an agreement to acquire Snyders Drug Stores’ 25 company-owned stores in Minnesota from Katz Group North America.

Walgreens also made several acquisitions in 2009. In late October, the retailer inked a deal to purchase 12 Eaton Apothecary pharmacies in the Boston area from D.A.W. Inc., an agreement that closed earlier this month. Last March, the company announced a deal to buy about 30 stores from Drug Fair in New Jersey and, in February, unveiled an agreement to acquire seven Rite Aid stores in San Francisco and five Rite Aid locations in Idaho.

As of Wednesday’s market close, Walgreens’ shares were up 50 cents to $34.19 after opening the day at $33.69.

At Duane Reade, the acquisition comes amid a transformation strategy begun last year that has seen the drug chain invigorate its retail and pharmacy businesses as well as pare costs, boost operational efficiency and reduce debt.

The chain has revamped the look and feel of its stores, rolled out a premium private label, introduced fresh to-go foods and snacks in high-traffic stores, upgraded its customer loyalty program and launched a major marketing campaign that included billboards and signs across the city as well as a mini magazine spotlighting hot deals in stores and new private-brand items.

The retailer also is enhancing its beauty care offering with the Look Boutique, which features prestige brands in high-end displays. The first Look Boutique was launched in Duane Reade’s new store in Manhattan’s Herald Square, and the company had said that half of the 30 new or remodeled outlets due to be opened this year are expected to include the boutique.

*Editor’s Note: Story updated with Walgreens’ share price information.