UPDATE 1-Walgreen now owns 45 pct of Alliance Boots

Aug 2 (Reuters) - Walgreen Co said on Thursday it has completed its initial investment in Europe's Alliance Boots Holding Ltd, a $7 billion cash-and-stock deal that brings the largest U.S. drugstore chain outside its home country for the first time.

Walgreen now has a 45 percent stake in Alliance Boots and has the option to buy the rest in about three years. Walgreen paid Alliance Boots $4 billion and gave it 83.4 million Walgreen shares. Those shares are valued at $3.02 billion based on Wednesday's closing price of $36.27, giving the deal a total value of $7.02 billion.

When the deal was announced in June, Walgreen shares were lower, valuing the deal at roughly $6.7 billion. Since then, Walgreen shares have climbed after it reached an agreement to return to Express Scripts Holdings Co's pharmacy network.

Walgreen stock was down 2 percent at $35.55 on Thursday afternoon.

Alliance Boots' executive chairman, Stefano Pessina, and KKR & Co's Dominic Murphy have now joined the Walgreen board of directors, while Walgreen Chief Executive Gregory Wasson and three other Walgreen executives now have seats on Alliance Boots' board.

As a result of the deal, Alliance Santé Participations SA is now Walgreen's largest shareholder and it plans to keep the stake for the long term, Walgreen said. Pessina is a director of Alliance Santé, owned by a family trust.

Vanguard Group Inc used to be Walgreen's top shareholder with 43.02 million shares, according to Thomson Reuters data.