The merger deal is between Germany's Krauss-Maffei Wegmann and Nexter Systems of France, providers of land defense systems.
"The alliance of KMW and Nexter creates a group with the momentum and innovative force required to succeed and prosper in international competition," the companies said in a joint statement. "In addition, it offers to its European and NATO customers the opportunity of increased standardization and interoperability for their defense equipment, with a dependable industrial base."
KMW is owned by Wegmann GmbH. Nexter S. A. is in the sole ownership of the French State holding company GIAT Industries.
The merger agreement was signed on Tuesday and is subject to regulatory approvals.
The companies said owners of the two companies will each receive 50 percent of the shares of the new holding company, whose name was not disclosed.