The owner of holiday brands Thomson and First Choice has agreed to merge with its German parent company to create the world’s largest tour operator, valued at £5.2billion.

TUI Travel will merge with Germany’s TUI AG in a nil-premium all share merger, after the firms first announced talks in June.

The merger brings together TUI Travel, which serves 30million customers, with TUI AG, which owns 230 hotels with more than 155,000 beds and seven cruise ships.

The firms said the merger will allow the enlarged business to offer more holidays, add up to 30 more hotels and two cruise ships, and make savings of at least £36m a year.

TUI Travel was created in 2007 through the merger of Britain’s First Choice holidays and the tourism business of TUI AG. A merger attempt was made in early 2013, but the deal collapsed over price.

The German parent currently owns just over half of TUI Travel. TUI Travel shareholders will receive 0.399 new TUI AG shares for each share that they own, giving them 46% of the combined group while TUI AG investors will hold 54% of the combined company.

The deal has the backing of Russian billionaire Alexey Mordashov, who is TUI AG’s largest shareholder with a 25% stake.

The enlarged business will initially be run by veteran TUI Travel chief executive Peter Long and TUI AG boss Friedrich Joussen as joint chief executives, but Mr Long will move to become chairman of TUI’s supervisory board in February 2016, leaving Mr Joussen as sole chief executive.

The combined business will be listed on the London Stock Exchange but will have its headquarters in Germany.

TUI Travel deputy chairman Sir Michael Hodgkinson said: “The board of TUI Travel is focused on delivering shareholder value and I and my fellow independent directors are confident that the finalised terms of this merger represent significant value for our shareholders.

“By simplifying the structure and combining the two businesses substantial synergies and cost savings will be realised.”

Mr Long added: “Friedrich Joussen and I are committed to working closely to ensure that we achieve significant synergies, cost savings, commercial benefits and long-term growth as the world’s number one integrated leisure tourism business.”