Two of Australia's largest property groups, Novion and Federation Centres, say they will merge to create an $11 billion company.
The merged entity would be Australia's third largest real estate investment trust and one of the 30 largest on the sharemarket.
It would have more than $22 billion in assets under management and an expected market capitalisation of $11 billion, better positioning it to take on the likes of Westfield.
That includes 102 shopping centres and other retail assets around Australia, including Novion's Chadstone and Forest Hill in Melbourne and Federation's Bankstown Central in Sydney.
The friendly tie-up would generate $84 million a year in total net cost savings, according to the companies.
Each Novion share would be exchanged for 0.8225 Federation securities, valuing Novion at $2.55 a share.
Shares in Novion, called CFS Retail Property Trust and managed by Colonial First State, closed at $2.32 on Monday.
Novion shares had jumped to close 22 cents, or 9.48 per cent, higher at $2.54 and Federation was three cents, 0.97 per cent, higher at $3.13.
Novion shareholders would own about 64 per cent of the merged group and Federation investors 36 per cent.
However, the smaller Federation is the suitor and its current chief executive Steven Sewell would lead the new group with Novion director Peter Hay the chairman.
"The merger brings together two high-quality management teams, creating an industry-leading executive team with expert skills in managing the full spectrum of retail assets," he said.
The deal is subject to approval from Novion's shareholders.
In January, Novion said lower oil prices, low interest rates and a lower Australian dollar should boost consumer spending in 2015 as it reported a small jump in specialty sales growth for calendar 2014.
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