Canadian-listed Lucara, part of the Lundin Group, has agreed to buy Irish exploration company African Diamonds, which is listed on London's AIM market.
Under the deal, African Diamonds shareholders will receive 0.8 of a Lucara share, as well as one share in Botswana Exploration, for each share.
This will give the Irish company's shareholders 26.57% of Lucara, which will own 100% of the AK6 diamond project in Botswana.
Botswana Exploration, which will be listed on the AIM market, will hold all of African Diamonds' interests apart from AK6.
African Diamonds says the deal values its shares at 51p, a premium of 27% on Friday's closing price.
Chairman John Teeling said that marrying African Diamonds and Lucara would create a €170.9m emerging diamond producer controlling two new kimberlite diamond mines. 'The new company, with strong financial backing, will be perfectly poised to exploit an expected gap in diamond supply,' he said.
The deal is subject to shareholder approval.
