Anglo Australian funds manager Henderson Group is to buy rival Gartmore in a £335m deal.
Gartmore shareholders will receive two Henderson shares for every three Gartmore shares, under the proposal.
Completion of the acquisition is expected to take place within the next three months, subject to a number of shareholder and regulatory approvals.
"By bringing across fund managers and integrating the business onto our own platform we will be able to enhance margins significantly," said Henderson chief executive Andrew Formica.
The boards of both companies intend to recommend "unanimously" to shareholders that they accept the offer, Henderson said.
If successful, the deal will create one of the largest British retail asset managers, running assets of around 78 billion pounds.
Gartmore shareholders will hold around 22.5 percent of the enlarged group if the deal completes and Henderson has received irrevocable undertakings to support the bid representing 60 percent of Gartmore's shares, Henderson said.
Henderson said Gartmore fund managers with collective responsibility for 84 per cent of Gartmore's assets under management have endorsed the deal, slaking fears many could walk out under new management.
Henderson confirmed on December 20 that it was in takeover talks with Gartmore, which has suffered key staff losses and outflows since listing at 220 pence in December 2009.
Institutional shareholders in Gartmore have advocated a quick sale, following the departure of fund manager Roger Guy, responsible for about 17 per cent of its assets.
Henderson was touted as a potential bidder for Gartmore having raised its stake in the rival to just over 14 per cent from nearly 12.4 per cent, even though Henderson had maintained it was interested in a company that would give it greater exposure to US markets.