German travel agent Tui and its UK subsidiary, Tui Travel, have revealed plans to merge following years of speculation about such a deal.
In a statement earlier, the firms said the deal would deliver a number of benefits, including £36 million of cost savings a year.
Tui already owns 55 per cent of the UK subsidiary.
The share prices of both companies rose following the announcement, with Tui Travel up four per cent in London.
“The independent directors of TUI Travel and the executive board of TUI AG are pleased to announce that they have reached an agreement in principle on the key terms of a possible all-share, nil-premium merger of TUI Travel and TUI AG,” a joint statement said.
Under the proposed terms of the deal, Tui Travel shareholders would receive 0.3999 new Tui shares for each Tui Travel share they own.
The merged company would have its headquarters in Germany but would keep a listing on the London Stock Exchange.
Any merger would be subject to UK and Germany regulatory approval.