Dress Barn Inc will buy teen-apparel seller Tween Brands Inc about $157 million in stock, as the women's clothing retailer looks to capture a larger share of the tween girls apparel market.

The deal values the operator of the Justice retail chain at about $6.22 a share, representing a premium of 20 percent to Tween Brands' Wednesday close of $5.18.

The news sent Tween Brands' shares up about 28 percent to $6.61 on the New York Stock Exchange, while Dress Barn's shares rose as much as 8 percent to $14.31 Thursday morning on Nasdaq.

The Justice concept, which offers an attractive mix of well-priced fashion for girls aged 7 to 14, will diversify and complement our existing business, David Jaffe, president and chief executive officer of Dress Barn, said in a statement.

Under the deal, each common share of Tween Brands will be exchanged for 0.47 shares of Dress Barn common stock.

Dress Barn expects the deal to be neutral to earnings in the first full year of combined operations and add to profit thereafter.

Dress Barn will also repay Tween Brands' bank debt as part of the deal and expects the consolidated balance sheet to have over $200 million in cash and investments, the companies said in a joint statement.

Following the deal, Tween Brands will operate as a separate unit and its management team, led by current CEO Mike Rayden, will continue to manage operations and lead Justice's future growth, the companies said.

Tween Brands shareholders will own about 16 percent of Dress Barn after the deal, which is expected to close in the fourth quarter of 2009.

(Reporting by Dhanya Skariachan in Bangalore; Editing by Himani Sarkar and Anil D'Silva)