Boots is one of the UK's best-known brand names

BBC News looks at the problems and positives facing the two companies and what they hope to achieve by joining forces.

Is the merger a done deal?

Not quite, even though the boards of Boots and Alliance UniChem have advised shareholders to accept the deal.

There is the chance that other companies will now be tempted to move for Boots, and observers have said that the competition authorities are likely to want to scrutinise the deal.

Following the merger, Boots and Alliance UniChem are expected to own about 17% of the UK's chemists and as much as 40% of the wholesale market.

That may prove to be too much of a dominant position for regulators, which may block the merger.

Are there other parties interested in Boots?

Press and market speculation seems to think there are.

A number of private equity firms are said to be interested in buying Boots and there is a chance that a large retailer in the UK or US may now table an offer.

What will it mean for consumers?

Lower costs at a corporate level may mean lower prices for cosmetics, medicines and products such as sun creams, analysts said.

The shops are also likely to change, with the newly formed company focusing on two styles of retail space.

There will be about 1,500 community pharmacies, which will be based in what are known as secondary High Street locations and have a main business of filling prescriptions, selling healthcare products and providing advice.

About 800 larger stores will become health and beauty "destinations", and will offer a wider range of cosmetics alongside the pharmaceuticals.

The company will also continue to run about 300 other outlets including Boots Opticians and Scholl footwear shops.

What's the initial reaction to the merger?

For the companies' share prices it has been good.

Boots jumped more than 7% in early trading on Monday, while Alliance UniChem climbed 5%.

However, the feel-good factor surrounding Boots may be down to expectations of a bidding war for the retailer, rather than optimism that the merger will revolutionise its business, analysts said.

Check Boots shares Alliance UniChem shares

Is it all good news?

No, it's not and many of Boots' large shareholders are unhappy at the move.

They complain that the company has run out of ideas and the merger is a last ditch attempt to revive the business by an increasingly desperate management.

Instead of taking on more shops, Boots should be looking at ways of getting the most from their existing floor space, cutting costs and polishing up their brand name, they say.

Critics also complain that a merger very rarely delivers on all of its promises, and destroys shareholder value rather than enhancing it.

So why push ahead?

Boots and UniChem Alliance argue that their businesses do not overlap significantly, allowing them to compliment each other.

Most of Boots' UK stores are on high streets, while Alliance's shops tend to be neighbourhood or community chemists.

Joining forces also would give them the opportunity to expand abroad using the Boots brand name.

Boots has tried before to move into foreign markets including continental Europe and Asia, but ended up having to close and sell many of its foreign stores. Its US business makes a loss.

Alliance UniChem is already well established abroad, with operations in Norway, Italy, Switzerland and the Netherlands.

According to the firms, they will save about �100m annually thanks to the merger.

Press reports have speculated that there will have to be thousands of job cuts, as well as the sale of chemists shops to satisfy competition regulators.

So who's buying who?

No one - the firms are calling it a merger of equals.

Is that possible?

Allegedly, but the power of Boots has been waning as supermarkets offer toiletries and pharmaceuticals, eating into its customer base.

Alliance UniChem, on the other hand, has been growing and, while it is smaller than Boots in terms of market value, it has closed the gap on its rival and become the third-largest pharmacy chain in Europe.

Alliance UniChem - formed in 1997 by the merger of Alliance Sante and UniChem - is also the UK's biggest drug wholesaler and Europe's second, supplying pharmacies direct from manufacturers.

While Monday's merger is called a nil-premium deal, there is a sweetener for shareholders.