Edeka can take over smaller rival Kaiser's Tengelmann, the Economy Ministry said, if certain conditions are met. The decision overrules the country's regulators, who had banned the deal over competition concerns.
Gabriel has made his approval to the Edeka takeover of Kaiser's Tengelmann contingent on certain conditions being met.
He announced on Thursday that he would grant a so-called "ministerial authorization" if Edeka agrees to safeguard the jobs of Kaiser Tengelmann's 16,000 workers for the next five years.
He also said that all contracts must be in line with the unions' collective bargaining agreements. Edeka would also not be allowed to hand over branches to self-employed owners, a practice it has long employed in its Edeka-branded stores.
Last April, Germany's competition authorities had halted the tie-up due to competition concerns. Edeka is Germany's biggest grocery chain, and regulators were concerned that a takeover of Kaiser's Tengelmann would further strengthen Edeka's market power with regard to producers. They also said consumers would have less choice in certain regions in Germany.
The authorities' 'no' to the deal meant the only way to get the takeover approved was by ministerial authorization.
According to German law, the Economy Minister can overrule regulators if they can demonstrate that the tie-up would create or safeguard a large number of jobs or if there is a general benefit to society that would make competition concerns appear secondary.
Gabriel said that in this case the 16,000 jobs "could only be safeguarded efficiently through a complete takeover of Kaiser's Tengelmann by Edeka."
Kaiser's Tengelmann has been in the red for some time, and its owner, the Tengelmann Group, was looking to sell the loss-making unit.
However, Germany's Agriculture Minister, Christian Schmidt, said while he respected Gabriel's decision, he believed that the takeover would give Edeka even more leverage with regard to negotiating prices with producers, putting them under even more pressure to produce cheaply.
ng/hg (Reuters, dpa, AFP)