Top Swiss discount chain Denner is to take over its German-owned competitor, Pick Pay.
The purchase, which will lead to the loss of 250 jobs, will allow Denner to strengthen its position on the Swiss retail market before the anticipated arrival of German discounters Aldi and Lidl.
No purchase-price details were given, but the NZZ am Sonntag and SonntagsZeitung newspapers speculated at the weekend that the deal was likely to be worth SFr50-70 million ($41-57 million).
The takeover - which is subject to regulatory approval - is due to take effect on November 1.
The Pick Pay brand will disappear during the course of 2006. Denner says it will have a 700-strong network of stores across the country by the time the takeover is fully completed.
The deal will lead to further consolidation in a retail market currently dominated by Migros and Coop.
Switzerland's two biggest retailers enjoy a combined share of more than 70 per cent of the food market.
In the past two years four retailers – Primo, Visàvis, Epa and Waro - have been taken over.
Pick Pay, which last year had a combined turnover of SFr825 million, has until now been owned by Germany's Rewe group.
Rewe has operated in Switzerland since 2003 when it took over a majority share in the Bon Appétit group.
Changing retail landscape
Denner - Switzerland's biggest discounter with 320 stores and 280 franchises - has made significant strides in the past three years. Last year it reported a turnover of SFr1.8 billion – 12 per cent up on the year before and a new record.
The country's retailers have been bracing themselves for the arrival of German discounters Lidl and Aldi, which could force them into a price war. Food prices in Switzerland are significantly higher than in neighbouring Germany.
Aldi, which is present in 13 countries, has announced plans to build stores and distribution warehouses in different parts of Switzerland. Its archrival Lidl is expected to follow Aldi to Switzerland.
The two stores, which pursue a strategy of selling a relatively small number of products at very low prices, have achieved a combined 40-per-cent share of the German market.
Since the start of the year Denner has tried to broaden its appeal with the Swiss public by extending its range of products to include fresh fruit, vegetables and meat.
swissinfo with agencies
Comparison of discounters
Turnover (in million francs): 1,843
Turnover (in million francs): 825
Rewe had been in discussions with Denner for some months over the sale of Pick Pay.
No details of the purchase price were given.
The deal will lead to a further contraction of the Swiss retail market, which has seen Primo, Visàvis, Epa and Waro shops disappear in the past two years.