Orange, Calif., and Valley Forge, Pa. -- Health care distribution giants Bergen Brunswig and AmeriSource Health will merge in a deal worth $7 billion, officials said.

Company officials said the deal is an equal merger and will be consummated by a stock-for-stock transaction to create the new company AmeriSource-Bergen. The new company will have an estimated $35 billion in annual operating revenue and expects by its third year to achieve an operating-cost savings of $125 million.

"Bringing together AmeriSource and Bergen makes great sense strategically, financially, operationally and culturally," said Robert E. Martini, chairman and chief executive officer of Bergen Brunswig, who will become chairman of the new company. "Our two companies have significant complementary strengths that will allow us to deliver enhanced benefits for shareholders, customers, suppliers and employees. This is a combination of equals. But more than that, both companies understand the pharmaceutical distribution business and have corporate cultures that are admired for their focus on quality, efficiency and customer satisfaction."

Under terms of the agreement, each share of Bergen common stock will be converted into a 37-cent share of AmeriSource-Bergen common stock, while each AmeriSource share will be converted into one share of AmeriSource-Bergen common stock. AmeriSource shareholders will hold 51 percent of the company, Bergen shareholders 49 percent. The new company will also have almost $2 billion in debt with a market capitalization of around $5 billion.

"As independent companies, AmeriSource and Bergen each have tremendous strengths and excellent growth opportunities," said David Yost, chairman and CEO of AmeriSource and soon-to-be CEO and president of the new company. "Together, we will have an enhanced ability to grow and create new offerings and innovative programs to further meet our customers' growth needs. This is a true combination of equals and our approach to the integration will be to select the best people, programs and operations from each company. With the synergy of our complementary programs and resources, this combination benefits the customers of both companies. In addition, it enhances our confidence that we can sustain a long-term earnings-per-share growth rate of 20 percent and continue to create significant shareholder value."

Yost said the merger will result in fewer, but larger and more efficient distribution centers and a consolidation of staff.

The merger, expected to be complete this summer, is subject to approval by company shareholders and to review by the Federal Trade Commission under the Hart-Scott-Rodino Act.

Bergen Brunswig is a supplier of pharmaceuticals and specialty health care products as well as information management solutions and consulting services. AmeriSource Health is a distributor of pharmaceutical and related health care products and service, and a provider of pharmaceuticals to acute care/health systems customers.