The proposed merger of Boots and Alliance UniChem has overcome a major hurdle after regulators gave the deal provisional clearance.
The Office of Fair Trading yesterday said it would not refer the £7 billion tie-up to the Competition Commission after the companies agreed to dispose of stores in 100 locations where the two businesses are dominant.
It had been feared that the loss of rivalry between Boots and UniChem pharmacies in certain areas would reduce choice for customers and lessen competition.
But the OFT said it was "satisfied" that undertakings offered by Boots and UniChem would address its concerns. It added: "If the parties do not give such undertakings, then the transaction will be referred."
The tie-up, which has been driven by the need to tackle the growing threat of super-market competition, will create a business with 2,600 UK stores and £13 billion of sales worldwide.
There are about 350 Boots stores in the vicinity of Moss or Alliance shops owned by UniChem.
The two companies welcomed the decision and said they would work with the OFT to "address the concerns relating to the prospect of the substantial lessening of competition in around 100 areas".
The planned merger was announced last October and followed a pledge by Boots chief executive Richard Baker to put "the chemist back into Boots".
The new company, called Alliance Boots, will have more clout when negotiating terms with suppliers and therefore more freedom to sell at lower prices, giving it a chance of challenging the supermarkets.
It is thought all the stores will be renamed Boots with the brand the focus for expansion abroad, building on UniChem's presence in the Netherlands, Italy and Scandinavia.
Last week Boots sold its over-the-counter medicines unit Boots Healthcare International, which makes Nurof en and Strepsils, for £ 1.93 billion to Reckitt Benckiser.