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An advertisement of 'Kuaidi Dache' taxi-hailing application is seen on the exterior of a building in Beijing.Reuters

Chinese taxi hailing apps, Didi Dache and Kuaidi Dache, have said they agreed to merge to form one of the world's largest companies in the ride-sharing sector.

The combined entity would be valued at about $6bn (£3.9bn, €5.3bn), Reuters reported citing a person familiar with the deal.

The firms will operate under separate brands, with Didi chief executive Wei Cheng and Kuaidi chief Dexter Chuanwei Lu becoming co-chief executives.

The new company's shareholding structure is unknown. It will formally introduce the new business after the Lunar New Year, which begins on 19 February.

Local taxi-hailing apps Kuaidi Dache and Didi Dache are market leaders in China, and have the backing of internet giants Alibaba Group Holding and Tencent Holdings, respectively.

Didi was estimated to have a roughly 55% market share, with Kuaidi claiming most of the remaining, according to a December study by Analysis International.

The companies, which connect Chinese passengers with more than 150 million taxis, have recently received more than $1bn from private investors. Didi raised $700m from Tencent and Russian private equity fund DST in December, while Kuaidi raised $600m from backers including Softbank and Tiger Global.

Meanwhile, Chinese Internet giant Baidu said in December it would invest in Uber to bring the US taxi-hailing service in China.

The merger comes as another blow for Uber's global expansion plans, as the company is already facing challenges in markets such as South Korea, India, and Europe.

The Wall Street Journal earlier reported that the companies are in discussions for a possible merger that still need the approval of each company's main investors.