LONDON - Asda has purchased the entire Netto chain of U.K. stores for ?778 million, the Daily Mail reports. The agreement provides the U.S.-owned Asda with close to 200 new locations, cementing its position as the second-largest grocery chain in the United Kingdom, behind Tesco.

Analysts say this acquisition will start a bigger battle between Tesco and Asda as the two companies struggle to become the nation??s largest discount supermarket. Owned by Walmart, Asda has typically run supercenters, but now has indicated it will focus on smaller stores in areas without an Asda location.

Meanwhile, the Association of Convenience Stores has expressed concern that this type of consolidation among the bigger supermarkets could spell trouble for shoppers. "The U.K. already has one of the most concentrated grocery markets in the world, with four companies controlling three-quarters of the market," said James Lowman, the association??s CEO.

"That leads to serious concerns about consumer choice and retail diversity, and Asda??s acquisition of Netto continues the dangerous trend of consolidation," said Lowman.

Asda president and CEO Andy Clarke countered that "customers will benefit from low prices on a significantly broader range of quality products, complemented by the wide range of services we offer in all our smaller stores. The creation of new in-store jobs in a tough economy will also be a welcome boost in scores of communities across the U.K."

Netto stores have an average of 8,000 square feet. Asda will convert these stores by summer 2011, adding twice as many staff, among other things.