Panama canal expansion
China Cosco Shipping is the largest container shipping line in Asia AFP/Getty Images

China Cosco Shipping has agreed a deal to acquire its Hong Kong rival Orient Overseas International (OOIL) for about $6.3bn (£4.9bn), creating a company that will become the third-largest container shipping line in the world.

Cosco Shipping will pay a 31% premium on OOIL's closing share price on 7 July as part of the all-cash deal, a joint statement released by the companies said.

Cosco will have a container fleet of more than 400 vessels and carrying capacity in excess of 2.9 million twenty-foot equivalent units if the takeover goes through, it added.

That would make it the biggest box carrier in the world after Denmark's Maersk and Switzerland's Mediterranean Shipping Company.

The merger is subject to regulatory approvals and approval from China Cosco's shareholders.

Shipping companies have been struggling to churn out profits in recent years due to overcapacity and a drop in demand.

In August last year, South Korean shipping giant Hanjin declared bankruptcy and left many of its cargo-laden vessels stranded at sea over fears that they could be seized by creditors at ports.

"Our company remains committed to enhancing Hong Kong as an international shipping centre," said Wan Min, chairman of Cosco Shipping Holdings.

"Following completion, we will continue to invest and strengthen our industry leadership, providing a more extensive platform for the employees of OOIL to excel."

Cosco will control 90.1% of OOIL upon the completion of the deal, with Shanghai International Port Group (SIPG) holding the rest.

OOIL executive director Andy Tung said: "We are proud of the business we have built and the people who have been building it.

"This decision has been carefully considered and we believe it helps ensure the future success of OOIL. We are confident that Cosco Shipping Holdings is the right partner for us."

OOIL shares jumped more than 19% on the news in Hong Kong.