Greene King is to buy 432 neighbourhood pubs from rival Laurel for £654m, the brewer and pub operator confirmed today.
The acquisition increases the size of Greene King's estate by 25% to more than 2,100 pubs.
It expects to make £6m of cost savings in the first year, partly through savings on overheads and the transfer of about 150 managed pubs to tenancies over the next 12 months.
Greene King intends to sell about 40 pubs for about £20m, some of them to allay any possible competition concerns that might be raised by the Office of Fair Trading.
The acquisition is to be funded entirely through new bank borrowings.
The neighbourhood pubs turned over £235.4m in the year to 29 February and earned £55.3m after overheads but before interest and tax.
Laurel is planning to concentrate on its high-street pubs.
The deal has to be approved by Greene King shareholders at an emergency meeting later this month