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The Co-operative Group is set to buy supermarket rival Somerfield for £1.57 billion.

The deal will go ahead on a cash free and debt free basis.

Somerfield has 880 stores employing around 55,000 people.

The Co-op – run mutually for its 2.5 million members – has 4,300 supermarkets and smaller outlets.

The combined supermarket group will have over 3,000 grocer stores and sales of £8 billion.

The deal is now subject to regulatory clearance from both the Office of Fair Trading – which may demand stores to be sold off if it deems the coming together of the two groups hits competition in certain areas.

The two parties have been in discussions over the deal since April.

Peter Marks, chief executive of The Co-operative Group, said: “This is good news for consumers and for competition in the grocery market where we will create a stronger fifth player in food and a convenience store chain with unrivalled geographic reach.

"The acquisition of Somerfield will provide the rocket fuel for our three-year
growth plan."

He added: “Given a deal of this nature, there are likely to be some local competition issues. We are confident we will be able to work through these with the Office of Fair Trading.”