Japan`s SoftBank Corp plans to merge internet unit Yahoo Japan with messaging app operator Line Corp to create a $30 billion tech giant, as it bags struggling internet companies to bulk up against rivals like Rakuten Inc. The telco in a statement said Yahoo Japan, which last month changed its name to Z Holdings Corp, will merge with Line, owned by South Korea`s Naver Corp, in a deal to be completed in October 2020.

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The companies aim for a definitive agreement by next month in a transaction that will see SoftBank Corp and Naver form a 50:50 venture that will control Z Holdings, which will in turn operate Yahoo Japan and Line. SoftBank Corp and Naver, which owns 73% of money-losing Line, plan to launch a tender offer for Line`s remaining shares at 5,200 yen each - a 13.4% premium to the shares` price before news of the merger broke. Line`s shares were up 2.6% at 5,180 yen in early Tokyo trade on Monday.

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Line has been looking for growth through expansion into areas such as QR code payments with Line Pay, but has been squeezed because of its limited funds and heavy-spending peers including SoftBank, which has a rival service called PayPay.

The merger deal is the latest example of consolidation in Japan`s technology industry. SoftBank this month completed its acquisition of online fashion retailer Zozo Inc, whose founder and ex-Chief Executive Yusaku Maezawa sold down his stake following a series of missteps.

Coming at a time of heightened political tension between Japan and South Korea, the merger might be the two countries` most significant economic cooperation of the last decade, Jaewoong Lee, a South Korean serial entrepreneur and founder of Naver rival Daum wrote on his Facebook page late on Sunday.

Z Holdings will continue to be a consolidated subsidiary of SoftBank Corp, which is a unit of investment conglomerate SoftBank Group Corp. Z Holdings and Line will hold a news conference at 0800 GMT.