Retailers are preparing to make the most significant merger in history, with Wal-Mart and Kroger set to merge to form the largest U.S. retailer and grocery company.
Walmart announced Tuesday that it would acquire Kroger for $1.4 billion, giving the retailer an 80% stake in the largest privately held supermarket.
Kroger would buy up to a third of the combined company.
The announcement came as part of a broader plan to transform itself from a company that offers grocery stores and other retail outlets to one that offers full-service grocery stores, grocery delivery services, online grocery shopping, and online grocery delivery.
The combined company would become the largest private-sector retailer in the U.K., the largest in Canada, and the second largest in the world.
The new company, which will be called Walmart, would also be the largest non-crafts retailer in North America.
The merger would combine the largest American grocery retailer with the second-largest U.L.I. retailer in Canada.
A spokesman for Kroger said the news will bring new vitality to the Canadian business, which has been losing ground to competitors such as Costco and Aldi.
Walmart and Kroenke will also each invest $1 billion in the new company.
Walmart, which makes more than 70% of its products in the United States, will also retain its 50% ownership of Kroger, the company said in a statement.
Kroenkes shares rose 2.2% in afternoon trading.
Walmart shares rose 1.4% in early trading in New York.
The deal was a direct response to the rise of online grocery stores such as Amazon.com and eBay, which have been gaining market share in recent years.
Both companies have also been investing heavily in data-driven marketing.
The merger will allow Walmart to grow its U.R.E. brand and reach more Americans, said David Giering, an analyst at Wedbush Securities in Boston.
The company’s stores are now one of the most visited in the country.
With Walmart’s U.P.S., the U-Store brand, Wal-mart is trying to gain a foothold in the fast-growing digital retail space.
In the U., it has its own store that sells the company’s full-line grocery products, including its own grocery items, but also offers a wide variety of other grocery products.
Last month, Walmart and Amazon announced they would begin testing an online grocery-delivery service, and Wal-Marts grocery-service division announced plans to add a full-foods grocery-serving service.
Kroger has also been expanding its offerings in the digital retail business.
Kroken.com, a website that provides grocery shopping information, said in May it had about 2 million members in the first three months of 2017, including about 200,000 in North American.
Krokens first U.N. grocery delivery service, which is operated by Wal-Bash, opened in September.
As part of the merger, Kroenka said it will consolidate the grocery business with the company that makes the KFC, Wendy’s, and Papa John’s brands.
According to the Wall Street Journal, the transaction will be structured as a merger of two companies with different business models, meaning that the combined companies would have no significant operations.
The companies will be able to operate as a single entity and operate in different locations, said Michael Schatzberg, chief financial officer at Kroenkastan.
The merged company would also have a more diversified portfolio of grocery and grocery-related services, said Mark Fachman, a financial analyst at Standard Chartered.
The combination is a reflection of the growth of online shopping, which Wal-Greens said it was working hard to increase its presence in.
In 2014, the combined Kroenken and Walmart brands were worth more than $1 trillion, according to FactSet.
At the same time, Walmart’s sales have fallen in recent quarters, with the firm posting a 2.5% decline in the fourth quarter of last year.