Canadian Tire Corp. (CTC.A.T), already a major player in Canada's sporting-goods sector, agreed Monday to buy Forzani Group Ltd. (FGL.T), Canada's largest sporting-goods retailer, for about C$771 million (US$797 million), aiming to attract a greater share of the lucrative 18-35 consumer market.

In a friendly deal, Toronto-based Canadian Tire, a general retailer operating more than 1,200 stores and gas bars across Canada, is buying Forzani for C$26.50 a share, or a 45% premium to the Calgary company's 10-day volume weighted average price. Canadian Tire already owns 1.3 million Forzani shares or about 4% of the total outstanding.

In Toronto Monday, Forzani is up 49% to C$26.23, while Canadian Tire has gained 2.7% to C$60.17.

Canadian Tire's offer for Forzani comes at a time when U.S. retailers are expanding into Canada to take advantage of the country's relative economic strength. In January, Wal-Mart Stores Inc. (WMT) announced plans to spend half a billion dollars to open 40 supercenter-format stores in the next fiscal year, of which eight will be new stores and the rest will consist of expansions or remodelings of existing stores and store relocations. The same month, Target Corp. (TGT) said it would buy as many as 220 stores of Canadian discount retailer Zellers for C$1.83 billion to expand here. Its first store is scheduled to open in 2013.

However, Stephen Wetmore, Canadian Tire's chief executive, said the Forzani transaction isn't driven by competition from U.S. rivals.

"Just because (competition from U.S. retailers is poised to increase and) is in the news a lot lately is not a reason to make an acquisition," Wetmore said. "What we need to do is focus on maintaining and growing our market share in key categories that are part of our identity, such as sports," the executive said.

The deal will more than double Canadian Tire's sports retail outlets to more than 1,000. Forzani's store operate under several banners including Sport Chek and Sports Experts. Youth and parents currently shop at Canadian Tire for sporting goods. With Forzani, Canadian Tire expects to access the consumers aged 18-35 that shop the country's malls and urban centers," a group that "currently eludes" the company, Wetmore said.

"We know most parents buy kids their bike at Canadian Tire; perhaps the second and maybe third," Wetmore said. "But as kids get older their tastes change; not only do they want more expensive bikes, (but) they want all the apparel and gear that goes along with the cycling activities and that's where Forzani comes into play," the executive said.

For Forzani, the deal generates value for shareholders while providing the backing to accelerate growth, Chief Executive Bob Sartor said in a release.

Forzani has annual revenue of about C$1.4 billion and more than 500 retail outlets and Canadian Tire expects the acquisition will be accretive to its earnings this year. Canadian Tire also expects to see significant cost synergies, projecting annual savings of about C$35 million, with about C$25 million realized in 2012.

The deal has the support of Forzani's board and is expected to close in the third quarter.

Canadian Tire expects to finance the C$771 million purchase, which excludes debt and Forzani share already owned by it, with C$500 million of cash on hand and the balance with short-term financing. It plans to continue to operate the Forzani retail banners as a separate business unit.

-By Ben Dummett, Dow Jones Newswires; 416-306-2024; ben.dummett@dowjones.com

(Judy McKinnon in Toronto contributed to this article.)