The battle of the electronics retailing giants has been called off. Canada's Future Shop (TSE:FSS)chain, which had been bracing for the arrival of the U.S. giant Best Buy (NYSE:BBY), has instead agreed to be bought out by its would-be rival for a handsome premium.

Best Buy is offering $17 a share in cash for each Future Shop share, a 47.8 per cent premium above Future Shop's Monday closing share price of $11.50. The shares closed Tuesday at $16.84, up $5.34.

"Best Buy's financial strength, reputation and retailing expertise is a winning combination for our employees, shareholders and customers," Future Shop CEO Hassan Khosrowshahi said.

Best Buy chairman Richard Schulze said the transaction would allow Best Buy to meet or exceed analysts' earnings expectations for the second quarter and the fiscal year. Best Buy figures the Future Shop acquisition will add 1 to 2 cents a share to earnings in the current fiscal year.

"Over the course of just the last three to four weeks we came to the conclusion that together we could accomplish infinitely more," Schulze told a Vancouver news conference.

The deal is worth $580 million. Future shop's majority shareholder, Inwest Investments, has agreed to tender its shares to the offer. Inwest owns 69 per cent of Future Shop.

Retail analyst Keith Howlett at Research Capital said Future Shop would have had a tough time going up against Best Buy. "Best Buy is a very large company that could sustain many years of market share wars," Howlett told Newsworld Business News .

"They have $15 billion US in sales in the U.S., so they could sustain some losses in Canada for some time and that would be much more difficult for Future Shop."

Khosrowshahi, who founded Future Shop in 1982, will resign as chairman and chief executive officer. Future Shop's president and chief operating officer, Kevin Layden, will continue as Future Shop's president.

Future Shop will operate as a separate Canadian subsidiary of Best Buy.

As recently as June, Future Shop was announcing plans to build 32 new superstores to compete against Best Buy, which was planning to open 65 superstores in Canada over the next three years.

While this deal is a friendly one, the two chains' have clashed before. Best Buy had hired away Future Shop's director of real estate and contracted their real estate broker in Canada. Future Shop had retaliated with a lawsuit trying to break up those relationships.

But that's ancient history now. The two companies say they expect the deal to be completed by late September.

Several years ago, Future Shop aborted plans to enter the U.S. market and go head-to-head against Best Buy. More recently, Future Shop's expansion plans included the Chapters book chain. In January, it made an offer for the book retailer, but backed off when Trilogy Retail Enterprises upped its initial offer.

Future Shop operates 88 stores across Canada.

Best Buy operates more than 1,800 consumer electronics stores in the United States.