The Co-operative Group has agreed to buy the 880-strong store chain Somerfield for £1.56bn, cementing itself as Britain's fifth biggest supermarket chain and a superpower in the convenience sector.

Co-op Group chief executive Peter Marks said the acquisition would lead to a renaissance of the Co-op brand across the country, and provide greater choice for consumers. He added that there was a "strong strategic fit" between the two businesses, with both focused on the competitive top-up and convenience shopping market.

The combined business will now operate more than 3,000 grocery stores and generate net sales of about £8bn. The move will also lift the Co-operative Group's market share from 4.2% to approximately 8%. This closes the gap on fourth largest supermarket chain Morrisons, which commands just over 11% of the market.

Most of the 880 Somerfield stores will be rebranded as Co-op under the deal, which is expected to be completed in the next few months. Marks admitted that a small number of stores were likely to be sold off to rivals such as Tesco and Asda.

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