Two of the largest shipbuilders in Japan Imabari Shipbuilding and Japan Marine United (JMU) are planning to form a capital and business alliance.

Imabari will acquire a 30% stake in JMU by the end of March 2020. A final agreement is due by the end of the financial year.

Both companies accounted for approximately 40% of the Japanese shipbuilding volume last year.

The combined entity will have a 10% market share in the global shipping industry.

According to a new deal, Imabari will receive an approximately 30% stake in JMU by purchasing new shares.

The partners will establish a new company that will design, build and market commercial vessels, including tankers, cargo ships and vehicle carriers.

Imabari and JMU will work together to develop new ship production technology.

Imabari manages ten shipyards, while JMU operates five shipyards in Japan.

In 2013, JMU was established by merging the shipbuilding operations of JFE Holdings and IHI. The company’s sales decreased to 11% to JPY254.1bn ($2.3bn) in the financial year that ended March.

The proposed alliance will enable the Japanese shipbuilders to compete with Chinese and South Korean ship makers, who are also going through a consolidation process.

Last week, China completed the merger of China State Shipbuilding Corporation (CSSC) and China Shipbuilding Industry Company (CSIC) to create a new shipbuilding company.

Currently, South Korean Hyundai Heavy Industries is in the process of acquiring Daewoo Shipbuilding and Marine Engineering.