UPDATE 1-Spartan Stores to buy 17 retail grocery stores

(Recasts; adds details, share movement)

Oct 13 (Reuters) - Grocery chain Spartan Stores Inc (SPTN.O) said it agreed to acquire 17 retail grocery stores, including 15 pharmacies, from praivately held VG's Food Center Inc and VG's Pharmacy Inc to expand its retail presence in key Michigan markets.

Grand Rapids, Michigan-based Spartan, which owns and operates 84 retail supermarkets including Family Fare Supermarkets, D&W Fresh Markets, and Felpausch Food Centers, did not disclose the terms of the deal.

VG's is a Fenton, Michigan-based retail grocery operator and currently Spartan's largest distribution customer.

Shares of Spartan were up about 9 percent at $25.61 in afternoon trade on Nasdaq.

The acquisition, which expands the company's supermarket store base 20 percent to 101 stores, is expected to have a neutral affect on earnings during the first year of ownership, Spartan said in a statement.

The company sees the deal adding to earnings during the second year of operation. It expects the transaction to close near the end of its fiscal 2009 third quarter.

Upon completion, Spartan expects deal to increase annual retail segment sales by about $310 million, with annual consolidated sales increasing about $160 million, Spartan said.

The Food Partners advised Spartan Stores on its acquisition of VG's. (Reporting by Dilipp S. Nag in Bangalore; Editing by Amitha Rajan)