Holiday companies MyTravel and Thomas Cook have announced they are to merge.
MyTravel has only recently returned to profit
The deal comes after UK-based MyTravel returned to profit for the first time since 2001 in December, having cut both costs and the number of holidays sold.
The parent company of the enlarged group will be named Thomas Cook Group, based in the UK and listed in London.
MyTravel and Germany's KarstadtQuelle, which owns Thomas Cook, said the firm will operate in the UK, Scandinavia, Ireland, western Europe, and Canada.
Shares in MyTravel closed up 28.5% on the London Stock Exchange, while shares in KarstadtQuelle closed up 4.2% on the Frankfurt Stock Exchange.
The merger, planned for completion by June, could result in cost savings of £75m a year across the businesses.
Michael Beckett, chairman of MyTravel, said: "Thomas Cook is a household name and the joining of the two groups will create an even stronger force in this highly competitive market."
The enlarged group will be 52% owned by KarstadtQuelle and 48% owned by the shareholders of MyTravel.
It will be led by a board drawn from MyTravel, Thomas Cook and KarstadtQuelle, with additional independent non-executive directors.
The group will be chaired by Thomas Middelhoff, chief executive of KarstadtQuelle and chairman of Thomas Cook, deputy chaired by Michael Beckett, chairman of MyTravel.
It will be managed on an interim basis by joint chief executives Peter McHugh, chief executive of MyTravel, and Manny Fontenla-Novoa, chief executive of Thomas Cook.
Thomas Middelhoff, CEO of KarstadtQuelle and chairman of Thomas Cook said: "The combined organisations will offer customers unrivalled choice and quality for their holiday and leisure time in all of the markets in which we operate."
The German retailer agreed to buy the half of Thomas Cook it did not own from Deutsche Lufthansa in December for 800m euros.
After announcing the merger MyTravel and Thomas Cook said they had no intention of bidding for rival UK holiday firm First Choice's package-holiday business.
First Choice's shares were behind in early morning trade in London.