JB Hi-Fi has confirmed it is acquiring whitegoods retailer The Good Guys for A$870 million in a deal that will see the combined group leapfrog Harvey Norman in sales.

The electronics retailer says the two chains have "highly complementary customer bases and product offerings" and the deal strengthens JB Hi-Fi's presence in the A$4.6 billion home appliances market.

"The Good Guys is a high-quality Australian retailer with an excellent track record," JB Hi-Fi chief executive Richard Murray said in a statement to the ASX on Tuesday.

"We are very impressed by what the owners and management have achieved with the business since its establishment and the leading market position they have created."


The deal will add The Good Guys' 101 stores to JB Hi-Fi's existing network of 295 stores across Australia and New Zealand.

The whitegoods retailer generated A$2.09 billion in sales last financial year, with before-tax earnings of A$74.2 million. JB Hi-Fi's revenue was $3.95 billion last year, with EBIT of A$221.2 million.

The combined revenue would put the two chains ahead of Harvey Norman, which generated A$5.33 billion in franchisee sales in FY16 with EBIT of A$522.5 million.

The two stores will maintain their separate brands and support offices. JB Hi-Fi says the acquisition will deliver net savings of between A$15-$20 million a year, after one-off implementation costs of between A$10-$12 million in the first 12 months.

JB Hi-Fi will tap shareholders for A$394 million in equity raising to fund the deal, with the balance to be funded from around A$500 million from new and existing debt facilities.

The Good Guys chief executive Michael Ford will continue to lead the business under JB Hi-Fi's ownership. Ford had previously expressed a preference for a share market float over a sale to JB Hi-Fi.

"We are very pleased to welcome Michael and his executive team and look forward to working together to create a market-leading consumer electronics and home appliance retail group," Murray said.

Last month, the competition watchdog gave the deal the all-clear, saying it would not substantially reduce competition in either consumer electronics or whitegoods retailing, with Harvey Norman and Bing Lee among a raft of other companies in the markets.

JB Hi-Fi rejected media speculation around the deal last week.