Funds managed by Apollo Funds, an affiliate of Apollo Global Management, have entered an agreement to acquire grocery retailer Cardenas Markets from investment funds affiliated with KKR.

Cardenas offers speciality groceries at low prices to the Hispanic community in California, Nevada and Arizona.

The company has a network of 59 stores and sources products from more than 500 vendors.

Apollo Funds plans to merge Cardenas with Tony’s Fresh Market, its Chicago-based portfolio company.

Following the acquisition, both companies will continue to operate under their respective brands and local leadership while having access to complementary capabilities and an expanded operating footprint.

The merged entity will have a total of nearly 80 stores across the western and mid-west US, generating a combined revenue of around $1.8bn.

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Following the integration, Cardenas CEO Doug Sanders will serve as CEO of the combined company and Cardenas chain, while Frank Ingraffia will continue to serve as CEO of Tony’s chain.

Apollo Private Equity Partners Andrew Jhawar and Joanna Reiss said: “We are excited to once again partner with Doug following our highly successful investment in Sprouts Farmers Market which Doug led as CEO under Apollo funds’ ownership.

“Cardenas and Tony’s have robust positions in the ethnic grocer space, and together can leverage best practices across their complementary go-to-market strategies, merchandising, customer loyalty programmes and more.

“This transaction will combine the best of both retailers and provide greater opportunities and scale for the respective brands and teams as they continue to bring quality, affordable groceries to diverse communities.”

The deal is expected to close in the third quarter of this year subject to customary closing conditions being met.

The financial terms of the transaction have not been disclosed.

Last month, funds managed by an affiliate of Apollo Global Management agreed to sell 67% of The Fresh Market to South American retailer Cencosud.