German container shipping firm Hapag-Lloyd has entered into a business combination agreement (BCA) with United Arab Shipping Company (UASC) to merge both the companies.

The deal has been approved by both UASC´s shareholders and the Supervisory Board of Hapag-Lloyd.

Subject to necessary regulatory and contractual approvals, the deal is expected to be completed by the end of this year.

"The combined company will have an annual transport volume of ten million TEU."

Once merged, the new entity will be one of the five largest container shipping lines in the world, with 237 vessels, including UASC´s six recently received 18,800 twenty foot equivalent unit (TEU) ships, 11 newly built 15,000 TEU ships, as well as a total transport capacity of nearly 1.6 million TEU.

The combined company will have an annual transport volume of ten million TEU, and a collective turnover of around $12bn.

Following the combination, CSAV, HGV (City of Hamburg) and Kühne Maritime will remain controlling shareholders of Hapag-Lloyd.

Hapag-Lloyd CEO Rolf Habben Jansen said: “This strategic merger makes a lot of sense for both carriers, as we are able to combine UASC’s emerging global presence and young and highly efficient fleet with Hapag-Lloyd’s broad, diversified market coverage and strong customer base.

“Furthermore it will give the new Hapag-Lloyd access to ultra large container vessels.

“After the successful integration of CSAV which was concluded mid of 2015 this transaction with UASC is another historic milestone for Hapag-Lloyd.”

Additionally, a shareholders support agreement (SSA) was signed among CSAV Germany Container Holding, HGV Hamburger Gesellschaft für Vermögens-und Beteiligungsmanagement and Kühne Maritime on the side of Hapag-Lloyd, Qatar Holding on behalf of the State of Qatar, and the Public Investment Fund of Saudi Arabia on the side of UASC.

The agreement was aimed at assuming certain commitments with regards to the merger and the future equity funding of the company.

Under the SSA, some of the controlling shareholders of either side of the companies have committed, to backstop a cash capital increase in the amount of $400m in the form of a rights issue within six months after the closing of the transaction.

Hapag-Lloyd currently has a fleet of 175 container ships and a total capacity of 955,000TEU.