Nissan and Mitsubishi Motors Corporation (MMC) announced that they have signed "a basic agreement to form a far-reaching strategic alliance between the two Japanese automakers".

The alliance will extend an existing partnership between the two, under which they have jointly collaborated for the past five years, the companies said in a joint statement.

Nissan Chief Executive and President Carlos Ghosn said: "It creates a dynamic new force in the automotive industry that will cooperate intensively, and generate sizeable synergies. We will be the largest shareholder of MMC, respecting their brand, their history and boosting their growth prospects."

Terming the deal as "a breakthrough transaction and a win-win for both Nissan and Mitsubishi Motors", he added, "We will support MMC as they address their challenges and welcome them as the newest member of our enlarged alliance family".

Nissan said the decision to acquire a strategic stake in MMC marks the latest expansion of its Alliance model, built around a 17-year cross shareholding arrangement with Renault. Nissan has also acquired stakes or signed partnerships with other automotive groups including Daimler, and AvtoVaz.

On closing of the deal, which is expected by the end of the year, Nissan will become the largest shareholder of MMC, it said, adding that MMC would propose Nissan nominees as board directors in proportion to Nissan's voting rights, including a Nissan nominee to become Chairman of the Board.

Mitsubishi Motors Corp is currently in the midst of a scandal for overstating fuel economy. Last month, the company had admitted that it overstated the mileage of four of its mini-vehicle models affecting 6,25,000 cars.

"This agreement will create long term value needed for our two companies to progress towards the future. We will achieve long term value through deepening our strategic partnership including sharing resources such as development, as well as joint procurement," MMC Chairman and Chief Executive Osamu Masuko said.

Nissan and MMC have agreed to cooperate in areas including purchasing, common vehicle platforms, technology- sharing, joint plant utilisation and growth markets, the statement added. 

Under the terms of the transaction, Nissan will purchase 506.6 million newly-issued MMC shares at 468.52 yen per share. The price reflects the volume weighted average price over the period between April 21, 2016 and including May 11, 2016.

MMC and Nissan said they expected Mitsubishi Heavy Industries, Mitsubishi Corporation and The Bank of Tokyo – Mitsubishi UFJ to maintain a significant collective ownership stake in Mitsubishi Motors, and to support the strategic alliance.

The transaction is subject to the signing of a definitive Alliance Agreement, expected by the end of May, 2016, the signing of a shareholders agreement with the current Mitsubishi Group shareholders of MMC and regulatory approvals, the statement added.