Japan’s SoftBank Corp plans to merge internet unit Yahoo Japan with messaging app operator Line Corp to create a $30 billion tech giant, as it bags struggling internet companies to bulk up against rivals like Rakuten Inc.

SoftBank said in a statement that Yahoo Japan, which has changed its name to Z Holdings, will merge with Line, owned by South Korea's Naver Corp, in a deal to be completed by October 2020.

Both the companies aim for a definitive agreement by next month in a transaction that will see SoftBank Corp and Naver form a 50:50 venture that will control Z Holdings, which will in turn operate Line and Yahoo. SoftBank Corp is a unit of investment behemoth SoftBank Group Corp.

SoftBank Corp and Naver, which owns 73 per cent of money-losing Line, plan to launch a tender offer for Line's remaining shares at 5,200 yen per share, a 13.4 per cent premium to the share price before news of the merger broke. Line has been looking for growth through expansion into areas such as QR code payments with Line Pay, but has been squeezed because of its limited funds and heavy-spending peers including SoftBank, which has a rival service called PayPay.

The merger deal is the latest example of consolidation in Japan’s technology industry. SoftBank this month completed its acquisition of online fashion retailer Zozo Inc, whose founder and ex-Chief Executive Yusaku Maezawa sold down his stake following a series of missteps.

Coming at a time of heightened political tension between Japan and South Korea, the merger might be the two countries’ most significant economic cooperation of the last decade, Jaewoong Lee, a South Korean serial entrepreneur and founder of Naver rival Daum wrote on his Facebook page .Z Holdings will continue to be a consolidated subsidiary of SoftBank Corp, which is a unit of investment conglomerate SoftBank Group Corp.