Sainsbury's will start to complete its takeover of Argos owner, Home Retail Group, after its £1.4 billion bid was accepted.
Sainsbury's said the deal will create a "multi-product, multi-channel" retailer that is "very attractive to customers".
The takeover is expected to be completed during the third quarter of this year. Home Retail Group's shareholders will receive a 12% stake in the new, combined business, with Sainsbury's giving shares and cash for the company.
Market experts believe Sainsbury's will close around 200 Argos stores in the next few years when leases expire, and relocate them inside its supermarkets.
When Sainsbury's lodged its formal bid for Home Retail Group, chairman David Tyler said: “The UK grocery retail industry is undergoing a period of intense change in customer shopping behaviour and in the competitive environment.
“This combination with HRG presents an opportunity to accelerate our strategy, delivering compelling revenue and cost synergies.
“We will create a multi-product, multi-channel proposition with fast delivery networks that we believe will be very attractive to the customers of both businesses.”
Steve Clayton, head of equity research at Hargreaves Lansdown, said: "This deal catapults Sainsbury's exposure to non-food items forward by around £4bn a year, and offers tantalising synergies from integrating the Argos estate and delivery capabilities with Sainsbury's own.
"For Home Retail investors, the deal offers a welcome recovery in the value of their investment, following many years of difficult trading."