Logistics company Exel - which employs about 10,000 people in the Midlands - has agreed to be taken over by German mail giant Deutsche Post in a deal valued at £3.7 billion.
It is the largest involving an FTSE 100 Index company since the takeover of Allied Domecq by Pernod Ricard for £7.4 billion this summer.
The proposed tie-up, which was backed by the directors of both companies over the weekend, will create the world's largest logistics business with a combined workforce of around 500,000 people.
Exel, based in Bracknell, Berkshire, has more than 110,000 staff worldwide and is best known for handling warehouse and distribution operations for a number of blue-chip retailers. It has a major operation at Hams Hall.
Deutsche Post said the deal made sense because it combined Exel's strong position in the UK and United States with its own activities in Europe.
The company, which acquired parcels group DHL in 2002, has also been looking to reduce dependence on its mail delivery operation in Germany, where the company will lose its monopoly in two years' time.
Around 72 per cent of the purchase price would be paid in cash, Deutsche Post said, with the remainder in new shares, increasing its share capital by some seven per cent. It expects the deal to close in December this year, given regulatory clearance.
But the deal could yet be scuppered by a rival approach, with United Parcel Service and Federal Express being seen as the most likely counter-bidders.
Andrew Beh, analyst at ING Financial Markets in London, said: "I think the price is right.
"The only likely counter-bidder would be UPS, and for UPS at this price level buying Exel would be value destroying."
UPS has refused to take itself out of the running. However, Swiss logistics firm Kuehne & Nagel said earlier this month it would not bid for Exel.
Exel has long been seen as a takeover target and announced earlier this month that it had attracted a takeover approach from Deutsche Post.
Yesterday's offer represents a 48 per cent premium on Exel's share price prior to the start of takeover speculation.
Deutsche Post chief executive Dr Klaus Zumwinkel described the proposed deal as a "major strategic step", while Exel said it presented an opportunity for its shareholders to realise significant value.
Exel's chief executive, John Allan, will lead the integration process and run the enlarged logistics part of the operation from Exel's base at Bracknell.
He added: "Completion of this offer would create the leading global player in logistics and accelerate progress towards our strategic goals."
The consumer and retail sectors account for 60 per cent of Exel's European contract logistics business, including work for retailers such as Boots, Morrisons and Sainsbury's. It also has a freight management operation within a business that generated total revenues of £7.2 billion in the year to June 30.
During the past 15 years, Deutsche Post has transformed its business from a government-managed agency into a multi-national group. Around 40 per cent of its revenues come from domestic and international courier, parcel and express delivery services, including through DHL.
It expects to generate cost savings of around 220 million euros (£149.1 million) from the tie-up by 2008, although it did not provide further details.
The deal has been structured to allow Exel shareholders to take a stake in the enlarged company, following the offer of both cash and Deutsche Post shares.
"There is a good strategic and regional fit between Deutsche Post and Exel," said equinet analyst Jochen Rothenbacher in a note. "Nevertheless, the planned financial structure includes a capital increase which is negative, in our view."
Mr Beh added: "This makes the enlarged group by far the dominant global integrated logistics provider.
"And John Allan will be on the Deutsche Post board, something the market will applaud given his high standing in the sector."