JB Hi-Fi has bought out rival retailer The Good Guys for $870 million in cash.

The purchase will be funded by a share issue worth $394 million and $500 million in debt, reports the ABC. 

JB says The Good Guys will still be run as a separate business and will retain its current management and support offices.

The combination of the two firms is expected to reap JB $15-20 million in benefits from the additional scale.

JB Hi-Fi's chief executive Richard Murray said the acquisition accelerated his company's push into the whitegoods sector.

"The acquisition is a very attractive strategic opportunity for JB Hi-Fi since The Good Guys is a highly complementary business which is aligned with our management philosophy and significantly enhances our offering in the $4.6 billion home appliances market," he noted in a statement.

The release also confirmed The Good Guys' current CEO Michael Ford will continue on in his role.

JB Hi-Fi says it expects implementation costs of the purchase to cost "$10-12 million primarily in the first 12 months".