Germany's competition watchdog has cleared plans from retailers Edeka and Tengelmann to merge their discount chains but has ordered the sale of almost 400 stores before the deal goes through.

The German Federal Cartel Office today (1 July) gave the conditional green light to the deal, which the companies first struck in November.

Edeka and Tengelmann had months of discussions with the anti-trust body following their agreement to merge their Netto and Plus outlets amid concerns that the move would reduce competition.

Under that initial deal, Edeka planned to take a 70% stake in a new business that would incorporate the Netto and Plus stores. The venture was set to run around 4,200 outlets in total, generating annual sales of about EUR11bn (US$17.4bn).

However, to get the deal through, Tengelmann will have to sell 378 Plus stores, located mainly in the east of Germany.

The cartel office has also ordered that Tengelmann's stake in the venture be reduced to 20% and that the companies' plans to work together on procurement be scrapped.

Markus Mosa, spokesman for Edeka's executive board, said the "stalemate" over the deal had "finally come to an end". Mosa added: "We're pleased to have allayed the reservations of the Cartel Office, and that we now have the go-ahead for increased competition in the German discount market."

Once Tengelmann offloads the stores, Edeka said it plans to convert 1,750 of the remaining 2,500 outlets to its Netto banner. The remaining shops, predominantly in inner-city locations, will keep the Plus name but will be revamped.