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A purchase of Whole Foods by Kroger would make more sense than is appreciated by Wall Street and would marry the companies’ strengths and weaknesses, according to analysts at Credit Suisse.

Since Jana Partners, the activist hedge fund, revealed a 9 per cent stake in Whole Foods last week, shares in the high-end grocer have soared on hopes of a possible turnround or sale.

Analysts had immediately singled out Kroger, the largest pure food retailer, as a potential buyer. But many note a bid would be held back by Kroger’s net debt of $14bn. Whole Foods has also seen same-store sales, a key industry metric, decline for six consecutive quarters, while Kroger has seen an uptick in five of the last six.

Credit Suisse says, however, that it believes “the market under-appreciates the potential to unlock value through a sale to a strategic buyer”, saying Kroger seems particularly well-positioned to bid.

“A deal would marry each company’s strengths with the other’s weaknesses, unlock massive cost synergies that could reach 3 per cent of Whole Food sales, help Kroger expand its customer base, and possibly provide the growth format it has been eager to develop,” analyst Edward Kelly wrote.

The food retail industry has been hard hit by increased competition with new players online and hard discounting. While Kroger has made share gains over the past decade, it has reached a “crossroads in its strategy” as those gains appear to be ending, Mr Kelly said. The company reported its first negative comp in 13 years in the last quarter of 2016.

“Kroger has stated in the past that it would be interested in acquisitions where it can drive material synergies while enhancing its core business through expertise it does not currently have. These types of synergistic acquisitions are rare, but we believe Whole Foods fits this profile,” Mr Kelly wrote.

(This post has been amended to identify the net debt figure as relating to Kroger.)

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