Investing.com -- Kroger announced a deal to acquire family-owned grocer Giant Eagle for $1.65 billion, adding approximately $9 billion in annual sales and 197 supermarkets to its footprint in a transaction Wolfe Research said signals the company is "increasingly being run more offensively."

Analyst Greg Badishkanian said the acquisition is consistent with management's "increased openness to do M&A" and will allow Kroger to densify its store network while expanding into adjacent markets.

The deal will be financed with $1.25 billion in cash and $400 million in assumed liabilities, keeping Kroger's net total debt to adjusted EBITDA ratio within its 2.3-2.5 times target range. Share buybacks and dividends are expected to remain on track.

Wolfe Research estimates that Giant Eagle's EBIT margins are in the 2.0-2.5% range, similar to Albertsons, and forecasts an incremental EBIT contribution of approximately $200-250 million.

With Kroger projected to generate $151 billion in sales in 2027, the deal should lift revenue approximately 6% to around $160 billion. Badishkanian added that this should translate to low-single-digit EPS accretion in year two after close.

The transaction is not expected to close until 2027, pending regulatory clearance. Giant Eagle operates across northern Ohio, western Pennsylvania, West Virginia, Maryland and Indiana, which Wolfe notes is "primarily in areas where KR already has a strong presence."

The addition of 197 supermarkets and 11 pharmacies would expand Kroger's store count by approximately 7% from its current 2,739 locations.