Supermarket chain Foodstuffs is merging its two North Island branches after six months of talks between the parties.

The grocery chain, which owns the New World, Pak'n Save and Four Square brands, had been operating separately in the lower North Island and north of Turangi.

Subject to a vote by the co-operative's members, regulatory compliance and court approval, the two North Island arms would be merged within several months.

But the chain says it will remain a co-operative and the merger was no prelude to a sharemarket listing.

Foodstuffs Auckland managing director Murray Jordan said a national merger had not been considered because the South Island branch was focusing on the Christchurch rebuild.

As part of the merger it would integrate its back-office functions so all North Island operations could run on one IT system.

Foodstuffs Wellington has an online ordering system in development, to keep it abreast of competitor Progressive Enterprises, which has online shopping for its Countdown brand.

By merging, Foodstuffs North Island can use the website retail technology the Wellington co-operative had developed.

"The merger will allow us to give people a better in-store experience," Jordan said.

"They will be refurbished to have a great deli, the best produce offerings; seafood will be the freshest with the best range . . . So it's about investment back in the stores.

"We're taking the best of Auckland and the best of Wellington right across the North Island."

When asked if contracts with some suppliers would be cut as a result of the merger, Jordan said no.

"We have a very good relationship with our suppliers. I've spoken to a number of them today and they're really positive about this change, looking forward to having only one point of contact to transact business in an easier way.

"Also, they'll have individual arrangements with the owner operators."

The total cost of the merger was still to be determined and would be presented to its members during the months ahead.

Last year three new stores opened in its upper North Island operating area, and a further three in the lower North Island.

Expansion would be matched in 2013 with six new North Island stores scheduled for construction before the end of the year.

Jane Freeman, who has had experience as a director on the boards of Air New Zealand, Pumpkin Patch and Delegat's, had been appointed to the proposed board for the merged Foodstuffs North Island company.

Former Fonterra board chairman Sir Henry van der Heyden, a strong proponent of listing the dairy co-operative's shares on the NZX, would also be joining the board but Jordan ruled out Foodstuffs listing on the stock exchange.

"We are very clear about this. Our DNA is as a co-operative and our strengths are as a co-operative. We have been around for 90 years as a co-operative and will be around for another 90 years as a co-operative."

BY THE NUMBERS

Financial profit after tax for year till February 2012: Foodstuffs Auckland: $24.2m Foodstuffs Wellington: $20.4m Foodstuffs South Island: $24.3m

Number of stores in February 2012, nationwide: 48 Pak'n Save 137 New World 275 Four Square 150 On The Spot convenience 18 Henry's Beer, Wine and Spirits 8 Gilmours 43 fuel site

- © Fairfax NZ News