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* Pharmacy arm has 750 outlets, 6,500 staff
* Proceeds will help cut 1.4 bln stg debt
* Deal seen completing in October (Adds detail, executive quotes)
LONDON, July 18 (Reuters) - Britain's Co-operative Group has agreed to sell its pharmacy business to the privately owned Bestway Group for 620 million pounds ($1.06 billion), providing funds for it to cut debt and invest in its core businesses, it said on Friday.
The deal follows a formal sale process initiated by the mutually owned Co-op, reflecting its decision that the pharmacy business was not part of its future strategy.
Media reports had said Bestway was expected to be named the preferred bidder for the pharmacy business, which has 750 outlets and over 6,500 employees.
The reports had said Bestway was competing against Lloyds Pharmacy, Alliance Boots and Carlyle.
The troubled 150-year-old supermarkets-to-funerals Co-op group said the deal is due to complete in October, with proceeds used to reduce its 1.4 billion pounds of debt and invest in its core businesses across its retail and consumer services arms.
"The successful sale of our pharmacy business is an important move for the Co-op," said Richard Pennycook, interim group chief executive.
The Co-op lost control of its bank and slumped to a 2.5 billion pound loss last year.
Its problems stem from an ill-fated 2009 takeover of the Britannia building society, which saddled it with a portfolio of risky property loans during the financial crisis.
A drugs scandal involving Paul Flowers, the former chairman of its bank, then moved the group's problems from the business pages to the front pages.
Bestway's business includes the UK's second largest independent wholesaler serving 125,000 independent retailers and caterers from 64 warehouses nationwide. Its retail club business is the largest in the UK with over 4,000 members.
The Co-op said it has agreed to provide certain services to the pharmacy business for up to 18 months, under a transitional services agreement.
Bestway will have the right to operate under the Co-operative Pharmacy brand for a transitional period of 12 months.
$1 = 0.5847 British Pounds Reporting by James Davey; Editing by Neil Maidment