The Co-op has sold its petrol station business to supermarket giant Asda for £600m, it announced on Wednesday, saying the deal would free up cash for the company and strengthen its financial position.

The deal includes 129 petrol forecourt sites across the country, representing 5% of Co-op’s total retail portfolio of 2,564 stores.

The company said that the sale would allow it to focus on its core retail business, including building new convenience stores, as well as growing its wholesale, franchise and e-commerce operations.

Expected to complete in the fourth quarter of this year, the Co-op said it also hoped the transaction would reduce its debt levels and bolster its balance sheet.

On Monday, Sky News reported that Asda was preparing to accelerate a long-awaited move into Britain’s convenience store market with a £450m swoop on the Co-op Group’s petrol forecourt business.

With Asda winning the auction, it takes the privately owned supermarket chain deeper into an area of Britain’s food retailing market which has historically been elusive.

Asda, which changed hands last year in a £6.8bn deal, has a fledgling convenience format called Asda on the Move, but is a bit-part player in that market compared to Tesco and J Sainsbury.

Formerly owned by Walmart, Asda is now owned by the Issa brothers and TDR Capital, who also control EG Group, one of the largest independent fuel retailers in Europe.

People close to the Co-op process confirmed that it was Asda, and not EG Group, that was in talks to buy the assets.

“This transaction is in line with our strategy to move away from operating petrol forecourts and supports our vision of Co-operating for a fairer world while building our core leading convenience business,” said Shirine Khoury-Haq, chief executive at the Co-op.

“I would like to thank our incredible colleagues in these stores, and we will work closely with Asda to ensure a smooth transition,” she said.

Mohsin Issa, the co-owner of Asda, said: “We have always been clear in our ambition to grow Asda and are hugely excited to create this new and distinct part of our business, giving us the opportunity to bring Asda value in fuel and groceries to even more customers and communities across the UK.

“We see convenience as a significant growth opportunity for the business.

“This acquisition accelerates our strategy in this area and forms part of our long-term ambition to become the UK’s second-largest supermarket.”