Shareholders in the online retailer, which has never turned an annual profit, will receive $3.80 a share, which is more than double the company's closing stock price on Wednesday.

Walgreen recently agreed to sell its pharmacy benefits business in an effort to focus more directly on retail and healthcare.

Drugstore.com, which sells health, beauty, clinical skincare and other products, had 2010 sales of $456 million, compared with fiscal 2010 sales of about $67 billion for Walgreen. Walgreen does not break out its online sales separately.

Walgreen said it expected the deal to close by the end of June and to cut about 3 cents a share from its 2011 earnings. The company also expects the deal to cut 3 cents to 4 cents more from earnings in 2013 and another 1 cent to 2 cents in 2014.

Founded in 1998, drugstore.com shares hit an all-time high of $9.19 in September 2003. But the company has come under pressure from competition that ranges from Amazon.com to Wal-Mart Stores Inc's push into online sales, while some health and personal care manufacturers, such as Procter & Gamble Co., have begun selling directly to consumers online.

"I think the online business is going to be very competitive and it is going to be very difficult for anybody to get a competitive advantage," Morningstar analyst Matthew Coffina said. The deal "seems value destroying to me."

But at the same time, the deal is also a very small one for Walgreen, which has a market capitalization of about $36 billion.

Walgreen has been trying to boost its own online presence of the past two years, adding online chats with pharmacists and express prescription refills under the guidance of Sona Chawla, who became the first e-commerce senior vice president for the company in 2008.

Shares of Walgreen were up 3 cents at $39.86 on Thursday on the New York Stock Exchange, while drugstore.com rose to $3.79 on Nasdaq from its Wednesday close of $1.79.