DETROIT (AP) _ CVS Corp. and the Arbor Drugs chain said Monday they will join forces in a $1.48 billion stock-swap that would create the nation's largest drugstore chain.

If approved by federal regulators and Arbor shareholders, the combined company would have more than $15 billion in 1998 revenue and 4,100 stores in 25 states and the District of Columbia. The merged chain would hold a 12-percent national share of retail prescriptions.

Rhode Island-based CVS said its purchase of Troy, Mich.-based Arbor, the nation's eighth-largest selling string of pharmacies, should produce annual cost savings of about $30 million.

CVS expects to finalize the deal in May, giving CVS its first stores in the key Detroit drug-retail market while bolstering CVS's Midwest presence.

``This transaction unites two growth-oriented companies with operating philosophies and corporate cultures that are highly compatible,'' said Thomas Ryan, CVS' vice chairman and chief operating officer.

Eugene Applebaum, Arbor's chairman and chief executive, said being absorbed by CVS should ``take our operations to new heights of success.''

Andrew Wolf, a Merrill Lynch analyst, said CVS' pursuit of Arbor signals the biggest _ and perhaps the last _ major union of drug retail heavyweights. Companies are often bought because they have substantial market share but are faring poorly.

``But Arbor's doing wonderfully well and represents opportunity for growth, not just for turnaround,'' Wolf said. ``CVS is paying a lot to get a great chain they can use as a growth vehicle in the Midwest. It's a great strategic move.''

Last year, CVS acquired rival drugstore chain Revco D.S. Inc. in a $2.8-billion deal.

As a result of the transaction, CVS plans to expand its new store program in 1998 to include the opening of 320 new and relocated stores. Over the long term, CVS said it expects to open an additional 150 to 200 stores in the Michigan market.

It was not immediately known if Arbor stores would change their names to CVS.

CVS _ with 3,888 stores in 24 states and the District of Columbia at the end of last year _ reported 1997 net revenues of $12.7 billion.

Arbor has 207 sites, mostly in southeastern Michigan. Fiscal 1997 revenues reached $962.8 million.

Analysts say the latest deal further underscores a trend toward consolidation as changes in the industry and heightened competition in the medical sector squeeze profits at drug stores.

In December 1996, Pennsylvania-based Rite Aid paid $2.3 billion to buy from Kmart Corp. its Oregon-based Thrifty PayLess chain of more than 1,000 stores. Months earlier, the Federal Trade Commission scuttled Rite Aid's plans to buy then-No. 2 Revco for $1.8 billion.

Rite Aid has roughly 4,000 stores in 31 states and the District of Columbia.

Arbor shares rose 12.5 cents to $22.81 1/4 on the New York Stock Exchange. CVS shares were unchanged at $70.06 1/4.