Deutsche Annington is to pay €3.9bn for listed German residential investor, GAGFAH.
The combination will create a company with a €21bn portfolio of around 350,000 residential units.
It will be the second-largest listed real estate company in Continental Europe.
The formal offer is expected to be launched before Christmas and will run until 21 January next year.
Deutsche Annington said the merger would save as much as €84m in operational and financing costs, improving the companies’ respective credit profiles.
“Shareholders will benefit from the projected synergies of the combined company and the creation of an even more liquid and attractive equity investment on the financial markets,” the company said.
The two parties will invest around €500m in maintenance and modernising their combined housing stock.
Rolf Buch, chief executive at Deutsche Annington, will keep his role, while Thomas Zinnöcker will become deputy chief executive of the combined business.
Buch said: “Getting the best of both worlds will be the outcome of this combination. We aim to create the leading company of European dimensions within the German housing market, which will be more competitive and profitable, located in North-Rhine Westphalia.”
A new name for the company will be decided by a joint executive board in due course.