The largest grocery store chain in the US, Kroger Co has said that it has agreed to buy Harris Teeter Supermarkets in a deal valued at $2.5 billion.

The all-cash deal will allow the company to expand its presence in the south-eastern part of the country. The offer comes with about $49.38 per share and it is 34 per cent more than Harris Teeter's closing price on 18 January, 2-13, when the media reported that the company is considering strategic options.

Harris Teeter Supermarkets had revenue of $4.54 billion during the previous year and it has a total of 212 stores in states including North Carolina, Virginia and South Carolina. Kroger has said that it will fund the deal through debt and that the combination will bring annual savings of $40 million to $60 million during the coming three to four years.

The shares of Harris Teeter rose 1.5 per cent to $49.26 at the close in New York. The shares of the company have gained 28 per cent this year. Meanwhile, Kroger increased 2.7 per cent to $37.15 and the shares have risen 43 per cent this year.