Large-scale retail group Saks Incorporated has agreed to sell its Northern Department Store Group to department store retailer The Bon-Ton Stores for $1.1 billion plus the assumption of about $85 million of liabilities.

York, Pennsylvania-based Bon-Ton will buy NDSG's operations, which consist of real and personal property, operating leases, and inventory associated with 142 NDSG units, the administrative/headquarters facilities in Milwaukee, Wisconsin, and distribution centres located in Rockford, Illinois, Naperville, Illinois, Green Bay, Wisconsin, and Ankeny, Iowa.

The acquisition of  NDSG - which generated 2004 revenues of about $2.2bn - will create one of the US's largest regional department store retailers, with 280 stores and $3.5 bn of revenue.

Bon-Ton president and chief executive officer, Bud Bergren, said: "The acquisition of Northern Department Store Group significantly broadens Bon-Ton's reach and presence, and represents a logical next step for us following our successful integration of Elder-Beerman.

"The transaction solidifies and strengthens our position in the Midwest and extends our footprint into the Great Plains states."

The transaction, which is subject to certain conditions, is expected to be completed early in the first financial quarter of 2006.

Bon-Ton has indicated plans to keep the various store nameplates of the acquired stores, and has also agreed to keep on NDSG store employees. The company also expects to retain certain administrative and support personnel.

Bon-Ton's corporate office will remain in York, Pennsylvania, where the corporate administrative and sales support functions will reside.

Merchandising and marketing functions for the combined operations will operate out of the existing NDSG headquarters in Milwaukee, Wisconsin. Transition teams will be created to develop plans for the integration of the two companies into a single entity.

Integration activities are expected to be completed within 18 to 24 months after closing of the transaction.

Michael MacDonald, chairman and chief executive officer of NDSG, said: "We are delighted with this announcement and the future prospects for our business. Bon-Ton is a great fit for our Northern Department Store Group, both geographically and culturally."

The sale comes as part of Saks' strategic review of its mix of businesses and their future potential to create shareholder value. The company sold off its Proffitt's/McRae's business to Belk for $623m earlier in 2005.

After Saks has completed the latest transaction, it will operate Saks Fifth Avenue Enterprises, Parisian and Club Libby Lu. The Company is currently exploring strategic alternatives for Club Libby Lu.

The Bon-Ton Stores is a regional department store chain operating 139 department stores and two furniture stores in the US.