Kroger Co on Friday morning announced that it would buy smaller rival Albertsons Companies in a $24.6 billion deal.

Kroger said in a statement it would pay $34.10 for each Albertsons share, representing a premium of about 33% to the stock's closing price on Wednesday.

The merger would bring together more than 2,700 Kroger stores across the United States and over 2,200 Albertsons locations.

Reuters reports that the deal between the top two retail chains would create a supermarket behemoth to take on leader Walmart. It adds that it would give them an edge over negotiations on product prices with suppliers including consumer goods companies, at a time when prices of groceries and essentials are soaring.

Kroger said it plans to invest in lowering prices and expects to reinvest approximately half a billion dollars of cost savings from synergies to reduce prices for customers. An incremental $1.3 billion will also be invested into Albertsons Cos. stores to enhance the customer experience, it said.

"We are bringing together two purpose-driven organizations to deliver superior value to customers, associates, communities and shareholders," said Rodney McMullen, Kroger Chairman and Chief Executive Officer, who will continue serving as Chairman and CEO of the combined company.

"Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores.

"This merger advances our commitment to build a more equitable and sustainable food system by expanding our footprint into new geographies to serve more of America with fresh and affordable food and accelerates our position as a more compelling alternative to larger and non-union competitors."

He added that the deal would lead to faster and more profitable growth and generate greater returns for the company's shareholders.

Vivek Sankaran, CEO of Albertsons Cos, said: "We have been on a transformational journey to evolve Albertsons Cos. into a modern and efficient omnichannel food and drug retailer focused on building deep and lasting relationships with our customers and communities.

"I am proud of what our 290,000 associates have accomplished, delivering top-tier performance while furthering our purpose to bring people together around the joys of food and to inspire well-being. Today's announcement is a testament to their success."

The transaction is expected to close in early 2024, subject to the receipt of required regulatory clearance and other customary closing conditions, including receipt of clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.