Volvo said it had achieved its long-held aim of taking over Scania after striking a deal with Scania's main shareholder, Investor AB, which has resisted its advances ever since it first bought a stake in the company last January. "I am very pleased that an agreement with Investor has now been reached on mutually beneficial terms," Volvo chief executive Leif Johansson said in a statement.

"A competitive company with two of the industry's strongest brands is being created, with major development resources and volumes, particularly in the critical diesel engine segment."

After buying Investor's stake in Scania, Volvo said it had 49.3 per cent of the company's capital and 69.6 per cent of its votes. It is offering to buy the remainder from shareholders at a cash price of 315 crowns per share -- a heftypremium over Scania's closing share price on Thursday of 244 crowns.

The merged group would have 31 per cent of the European heavy truck market, the biggest share ahead of German competitor DaimlerChrysler. It would also get 19 per cent of the global market, behind DaimlerChrysler's 25 per cent.

Scania's shares soared 31 per cent on the news, touching a high of 310 crowns before slipping back to 305 at 1005 GMT. But Volvo shares initially slipped 3.2 per cent to 236 crowns on concerns the price was too high. At 1045 GMT, they had recovered to 243.5 crowns, just below the previous day's close.

"On the minus side, the price is a little higher than expected. But it's clearly positive that uncertainty surrounding the deal has disappeared," auto analyst Erik Kjellgren at MeritaNordbanken in Stockholm said.

Both Scania and Investor said they were pleased with the outcome of the deal, without giving any reasons for the change of heart. Volvo has been trying to acquire Scania since it sold its car division toUS automaker Ford for 50 billion crowns last January, to concentrate on commercial vehicles. "It is good that our two largest owners have now reached an agreement and that we are free of continued speculation regarding Scania's future," Scania president Leif Ostling said.

Investor said the deal would give it up to 13 per cent of the voting rights in Volvo, but gave no capital estimate. "All along, our aim has been to find a long-term suitable solution for Scania and thus, its shareholders...," Investor chief executive Marcus Wallenberg said in a statement.

In a scheduled announcement released a few hours early, Scania said its first half profit after financial items jumped 53 per cent to 2.24 billion crowns, slightly above forecasts. Volvo said it was paying Investor the agreed cash price for 60 per cent of acquired Scania shares and was offering either the same payment or six newly-issued Volvo shares for five of Scania's for the remaining 40 per cent.

Scania shareholders would have the same choice.Volvo chairman Lars Ramqvist told a news conference that the group would have to reconsider plans to buy back 10 billion crowns' worth of its shares because it did not know which alternative shareholders would take.

Johanssen said that depending on which option shareholders took, Volvo still could have up to 25 billion crowns in cash after the deal was completed. He also said the company was leaving the door open for future acquisitions.

The merger was expected to boost Volvo's earnings per share for the full year by one to five crowns and create synergies of between four to five billion crowns. Volvo expected to take a cost hit of a "couple of billion" over the next few years, Johansson said.