Japanese convenience store operator Lawson Inc said on Tuesday that it would buy upscale supermarket chain Seijo Ishii Co for about 55 billion yen ($503 million), including debt, from investment fund Marunouchi Capital.

The deal, which will help Lawson further diversify and expand its retail network, is expected to be completed in late October. Lawson said it would use cash and bank loans to finance the move.

Smaller-scale specialty stores like Seijo Ishii that fall somewhere between convenience stores and supermarkets have become a popular format in Japan as the number of single-person households increases.

Seijo Ishii has over 100 stores in Japan and is accelerating store openings mainly at train stations and shopping malls.

Lawson this year opened the first of its Lawson Mart stores, which are aimed at marrying the convenience of 24-hour operations with value-added goods such as fresh produce and ready-made foods.

The company is targeting 700-800 Lawson Mart stores in Japan over the next three years in a bid to gain an advantage over competitors including 7-Eleven operator Seven & I Holdings.

Shares in Lawson were up 0.9 percent by late morning trade, while the benchmark Nikkei average fell 1.4 percent following weak economic data.

Reuters first reported in April that Lawson was among the first round of bidders along with department store operator Isetan Mitsukoshi Holdings Ltd to take over the firm from Marunouchi Capital, which is held by Mitsubishi Corp and Mitsubishi UFJ Securities Holdings Co.