Spartan Stores, a grocery distributor and retailer based in the US, has inked a $1.3bn binding merger agreement with Nash Finch.

As per the terms of the agreement, Nash Finch shareholders will be issued a fixed ratio of 1.2 shares of Spartan Stores common stock for each share of Nash Finch common stock.

Following the closure of the transaction, Spartan Stores stakeholders will hold 57.7% equity in the combined company, while Nash Finch shareholders will own the remaining 42.3%.

The merger will create a major company with grocery wholesale, retail and military commissary and exchange channels with 22 distribution centers across 37 states and 177 retail stores.

The combined company will also have a comprehensive portfolio of strong private brands including Spartan Stores’ Spartan brand and Nash Finch’s Our Family and Nash Brothers Trading Company brands.

Spartan Stores president and CEO Dennis Eidson said the deal allows to combine Spartan Stores’ grocery distribution and retail operations in Michigan, Indiana and Ohio with Nash Finch’s grocery distribution to military commissaries and exchanges and its complementary wholesale grocery network throughout the US.

"Together, we will create one of the premier grocery wholesaler and retail operators, with a comprehensive portfolio of high quality private brands, nationwide distribution services and a strong platform for future growth," added Eidson.

By the third full fiscal year of merged operations, the combined entity is expected to achieve about $50m in annual cost synergies attributable to consolidated corporate works, procurement and other operating efficiencies.

Nash Finch president and CEO Alec Covington remarked: "This transaction is consistent with our vision to become the largest and most admired food distributor in the U.S. The complementary operations and outstanding strategic fit of these two companies create significant value for both companies’ shareholders."

Subject to customary approvals, the transaction is expected to close by the end of 2013.