The boards of both firms are recommending the deal, which will see EDB hold 53% of the combined entity with ErgoGroup owner Posten Norge receiving 81,064,078 new shares, representing 47% of the new firm.

This will make it the single largest shareholder, although the state-owned postal services provider has pledged to cut its stake to a maximum 40% within two years. Telenor, which owns 51.3% of EDB will have a 27.2% stake in the merged firm.

Following the transaction, the combined company will conduct a share issue of up to NKr1 billion in new equity to strengthen its balance sheet.

The company - called EDB ErgoGgroup on an interim basis - will see EDB chairman Arve Johansen take on the same role with the CEO position going to ErgoGroup;s chief Terje Mjøs. It will have approx 10,000 employees in 135 offices across 16 countries, with headquarters in Oslo.

The firms claim that by merging they can "benefit from annual synergies" of between NKr250 million and NKr350 million. Most of these are cost related and will come from IT operations in connection with server consolidation and single accounting of software licenses but job loses will also be involved.

The realisation of synergies will take up to 18 months and will have one-off cost estimated to one year of full synergies.

John-Arne Haugerud, acting CEO, EDB, says: "Together with ErgoGroup, we are now taking a historic leap forward in the best interests of our customers, employees and shareholders. We are bringing together 50 years of IT innovation in Norway and the Nordic market, establishing a unique foundation for continued growth and technological development."