US grocery retailer and wholesaler Spartan Stores is to merge with food distributor Nash Finch Co.

Under the terms of the US$1.3bn deal, Spartan shareholders will own 57.7% of the combined company, which would have sales of around $7.5bn on a pro-forma basis. Nash Finch investors will own the rest of the business.

The new business would have 22 distribution centres across 37 states, as well as 177 retail stores. 

The companies said the enlarged business would also be “the leading distributor to military commissaries and exchanges” in the US. Exchanges are retail stores operating on military installations.

Spartan distributes own-label and branded products to around 390 independent grocery stores in Michigan, Indiana and Ohio. It owns 102 outlets in Michigan.

Nash Finch is the largest distributor to military commissaries and exchanges but also owns a base of retail stores under banners including Family Fresh Market and Econofoods.

Spartan president and CEO Dennis Eidson, who will take the same role at the enlarged company, said the new business would be “one of the premier grocery wholesaler and retail operators” in the US.

Eidson said: “We will become a stronger and more efficient organization with an enhanced ability to leverage our size, geographic reach and hybrid business model to better compete in the evolving grocery industry. In addition, the scale of the combined company will provide efficiencies and savings in purchasing and strengthen our ability to serve our independent retail customers, military commissaries and exchanges and retail consumers.”

Nash Finch president and CEO Alec Covington will take on an advisory role at the new company as the two businesses are integrated. He said: “The complementary operations and outstanding strategic fit of these two companies create significant value for both companies’ shareholders.”