The London Stock Exchange group and Deutsche Boerse today agreed on a "merger of equals" which will bolster the two exchanges.
If it goes through, LS shareholders will own 45.6 per cent of the new company. Meanwhile, shareholders of the Frankfurt-based exchange Deutsche Boerse will get the remaining 54.4 per cent.
Last month, LSE revealed it was in merger talks with Deutsche Boerse – their third attempt to strike a deal in less than two decades. Previous attempts fell through in 2000 and 2005.
"We are creating an industry-defining combination which will be a leading global market infrastructure business, very well positioned to create new benefits and efficiencies for our customers and increase value for our shareholder," Xavier Rolet, chief executive of the LSE said.
Carsten Kengeter, chief executive of Deutsche Börse, added: "Strengthening the link between the two leading financial cities of Europe, Frankfurt and London, and building a network across Europe with Luxemburg, Paris and Milan will strengthen European capital markets."
"It is the logical evolution for our companies in a fundamentally changing industry."
Kengeter will become chief executive of the new company, while Rolet will step into the role of adviser to ensure a smooth transition.
Reports suggest LSE could spin off the French division of LCH.Clearnet, and may also shift control of the firm's London-based interest rate derivatives business to German rival Eurex, in an effort to make a potential £20bn takeover by Deutsche Boerse.
However the New Stock Exchange (NYSE) owner ICE has said it's considering a bid for the LSE, a move which could derail today's deal, and start a bidding war.