Walmart’s Asda Unit Buys British Netto

Asda, the British arm of Walmart (Bentonville, Ark.) is buying the U.K. stores of deep-discounter Netto Foodstores Ltd. for about $1.1 billion, according to The Wall Street Journal.

The move gives Asda smaller stores that can compete with rivals that have opened similar-sized locations in local markets in recent years. Asda is the No. 2 grocer in Britain after Tesco, however its market share has fallen in 2010.

The Netto deal includes 193 stores and marks Walmart’s first major acquisition in Europe since its failed investment in Germany more than a decade ago.

Asda’s plans call for changing the Netto stores to an Asda format once the deal is approved, and integrating them into its new supermarkets division for units smaller than 25,000 square feet. “It will not allow them to capitalize to the same extent as rivals Tesco and Sainsbury on the huge growth potential in convenience store retailing,” says Malcolm Pinkerton of Verdict Research.

According to The Journal, Walmart generates a quarter of its annual sales outside the U.S.