Directors at steel firm Arcelor have opted to back an offer to merge with Mittal Steel after marathon talks.
Guy Dolle and other Arcelor bosses held a nine-hour meeting
Arcelor resisted the Mittal bid for months, considering a rival proposal from Russia's Severstal, but reportedly caved in when Mittal raised its offer.
The decision, which was reached during a nine-hour meeting, will be put to a shareholder vote later this month.
If approved, the move will merge the world's two largest steel companies, creating a powerful global giant.
Arcelor directors met for nine hours on Sunday to consider rival bids from Mittal, the world's biggest steel company, and Russian firm Severstal.
Arcelor Chairman Joseph Kinsch told reporters in Luxembourg that Arcelor's board unanimously backed the Mittal offer.
Mittal was already the world's biggest steel company
The proposed new company would be named Arcelor-Mittal, he said.
The decision was made after Mittal raised its initial offer by 10%, he said, according to AFP.
The planned merger would create a vast enterprise controlling 10% of the global steel market, with annual production more than three times the output of its nearest rival, Japan's Nippon Steel.
The Arcelor bosses' decision will be crucial in influencing the company's shareholders, who meet later this month to decide the firm's future.
The decision follows a bitter, five-month boardroom battle which began in January when Mittal, the world's largest steel company, launched a take-over bid for Arcelor.
Arcelor initially rejected the 25.8bn euros ($32.3bn) bid, arguing that it undervalued its assets and that the two businesses were not compatible.
Would control 10% of world steel market
Total sales of 55bn euros
More than 320,000 employees
At one point Director Guy Dolle described the offer as having been made with "Monopoly money" and denigrated Mittal's products: "They make eau de Cologne, we make perfume."
The long process reached its climax on Sunday, after several days of intense negotiations between Arcelor and both Mittal and Severstal, when directors met to decide between the competing offers.
Sources close to the talks said Mittal raised its offer to 40.37 euros per Arcelor share from the previous 37.74 euros per share, although the details of the proposed deal have not yet been announced.
Arcelor was previously thought to have leant towards a 13bn euros merger with Severstal.
But there was backing from some Arcelor shareholders for a deal with Mittal, which is headed by Indian-born billionaire Lakshmi Mittal.
Arcelor resisted the takeover bid for five months
Arcelor had said a union with Severstal would create a more efficient and productive business than one created by a merger with Mittal.
A merger with Severstal - controlled by Russian oligarch Alexei Mordashov - would have created a business with 40.6bn in sales, accounting for 6% of global steel production.
However, some Arcelor shareholders had expressed concerns that Mr Mordashov could end up controlling the company.
Mittal Steel's plans were initially criticised by governments in France, Belgium and Spain - where Arcelor has operations - due to fears of huge job losses resulting from the deal.
However, political opposition to the deal has since waned.
Mittal believes Europe's largest firms need to merge to make their operations more efficient and to compete with firms in the US and Asia.