Ports and ferries group P&O has agreed to be bought by Dubai Ports World in a takeover deal worth £3.3bn ($5.7bn).
P&O has scaled down its ferry activities in recent times
P&O said in a statement that Dubai Ports (DP World) had offered 443 pence per share in cash for the company.
Last month, P&O announced that it had been approached by a potential bidder and speculation mounted that Dubai Ports was behind the talks.
The takeover signals the end of 168 years of independence for the world's fourth-largest ports group.
DP World, owned by the Dubai government, said it planned to keep P&O's headquarters in London and chief executive Robert Woods would continue to head the business.
There are unlikely to be any job cuts as P&O will be run as a separate business, DP World says, as there is very little overlap between the operations of the two companies.
P&O's pension fund, which currently has a deficit of £200m, will be protected through a one-off cash injection of £125m by DP World, followed by further payments over the next five years.
Shares in P&O closed up more than 1% at 439.5 pence at the close of trade in London on Tuesday.
Founded in 1837, P&O has three divisions - ferries, ports and logistics. In its heyday in the mid-1920s, it owned a fleet of almost 500 ships before transforming itself in the post-war era to concentrate more on cargo shipping and ports.
P&O has also dipped its toes in a number of sectors outside shipping in its history.
A brief foray into oil exploration took place in the 1970s and P&O once owned Bovis Homes and the Earls Court & Olympia exhibition centres.
Its cruise division - P&O Princess Cruises - was demerged in 2000 and later bought by Carnival. Earlier this year, it sold its stake in container shipping division Royal P&O Nedlloyd for £381m.
Currently, the group is on the verge of winning planning permission for a £1.5bn ports development in the Thames Gateway.
Though P&O was not actively looking for a takeover bid, the offer proved too attractive to resist.
"We did not solicit the bid but we received an attractive proposition. It was followed by some very tough negotiations," said P&O chairman Sir John Parker.
"Putting P&O and DP World together will create one of the top three leading ports groups in the world."
The offer price represented a 46% premium to P&O's price before 30 October when P&O confirmed it was in talks. News of the potential bidder sparked a 30% rally in its share price on hopes that the approach could trigger a bidding war.
Denmark's Moeller-Maersk, Singapore government investment agency Temasek Holdings and Hong Kong's Hutchison Whampoa were named in the press as potential rival bidders for P&O.
However, no rival bids have emerged so far.
DP World is one of several Dubai government-linked firms looking for assets to invest in, backed by huge cash piles from the Gulf emirate's resources.
Ports are currently reaping the rewards of an expansion in world trade, as goods made in Asia find their way to the US and Europe.
World trade volumes are expected to grow 7.6% in 2006, according to the International Monetary Fund (IMF).
Dubai Ports said it hoped to expand its operations following the P&O deal.
"Asia, in particular India, is an opportunity ... as well as Europe," DP World chairman Ahmed Bin Sulayem told reporters on a conference call.