The Co-Operative Group has agreed a long-awaited deal to buy Somerfield for 1.57 billion pounds ($3.1 billion) to strengthen its position as Britain's fifth-biggest food retailer.
The Co-Op, Britain's largest mutual retailer, said on Wednesday the deal was on a cash-free and debt-free basis.
Somerfield's owners, a consortium that includes private equity firm Apex, Barclays Capital and property magnate Robert Tchenguiz, put the group up for sale in January amid newspaper reports they were seeking as much as 2.5 billion pounds.
The consortium bought the 880-store chain for about 1.1 billion pounds in 2005.
Media reports have said the Co-Op, which is also Britain's biggest provider of funeral services and third-largest pharmacy chain, plans to sell on around 120 of the stores it is buying.
Wm Morrison, Britain's fourth-biggest food retailer, has said it would look at buying individual stores, while up market grocer Waitrose and frozen food specialist Iceland have also been tipped as potentially interested parties.
The Co-Op, created last July from the merger of The Co-Operative Group and United Co-Operatives, currently runs over 2,200 food shops and in April announced a 1.5 billion pound investment drive aimed at doubling profits over three years.