MADRID/FRANKFURT (Reuters) - Siemens and Spain’s Gamesa agreed on Friday to create the world’s biggest builder of windfarms, with the German company paying 1 billion euros ($1.13 billion) for a majority stake in the combined business.

Siemens AG logo is seen in new headquarters in Munich, Germany, June 14, 2016. REUTERS/Michaela Rehle/File Photo

The group would bring together Siemens’ strength in offshore wind power and Gamesa’s leading role in developing markets.

Months in the making, the venture would overtake Denmark’s Vestas to become the world’s largest wind farm manufacturer by market share, operating in the mature North American and European markets and fast-growing markets such as India, Mexico and Brazil.

Engineering company Siemens, which has struggled to make its wind turbine business profitable, will take a 59 percent stake in the company but not have a majority on the board, Gamesa said in a statement to Spain’s market regulator.

In return for taking the leading role, Siemens will pay Gamesa’s shareholders, which include Spanish utility firm Iberdrola, 1 billion euros in cash in the form of an extraordinary dividend.

The businesses will be combined within Gamesa which will retain its Madrid listing. The Spanish group is creating new shares to be offered to Siemens, whose other products include trains, power network equipment and medical body scanners.

Cost savings and benefits from the new business, which will be operational by the end of the first quarter of next year, will be worth 230 million euros of earnings before interest and taxes (EBIT) within four years, Gamesa said.

The combined group’s order portfolio would be worth some 20 billion euros, it added.

Siemens is dominant in the offshore wind market but relatively weak onshore. Gamesa is strong in emerging markets, notably Latin America, where it expanded when the Spanish government cut subsidies to clean energy producers in 2013.

WIND POWER GIANT

Iberdrola, which backed the proposed merger, will see its stake in Gamesa diluted to 8 percent from almost 20 percent.

Shares in Gamesa, which were suspended from trading after the initial announcement, reopened up 5.3 percent at 1245 GMT, against a 2.1 percent rise on Spain’s blue-chip Ibex index.

The combined business will have 21,000 employees, an installed power base of 69 gigawatts, and will be headquartered in Spain.

Siemens will have five out of the 13 board members in the new group, Gamesa said, with Iberdrola having two of its own.

The deal would be the latest in a string of mergers in the wind industry. Having weathered years of overcapacity and losses, it is now thriving as demand for carbon-free electricity increases.

Getting bigger should also help to lower costs, one of the industry’s key targets in its race for more efficient turbines, which in turn will make it more competitive compared to conventional sources of energy such as gas and coal.

Gamesa and Siemens said in January they were discussing a possible wind merger but talks stalled because of concerns linked to an existing joint venture, Adwen, between Gamesa and France’s state-owned energy company Areva.

Gamesa said on Friday it had granted Areva three months to decide whether it wanted to buy out its stake in the venture or sell it.

General Electric, which wants to become a major player in the offshore wind industry, last month said it was interested in buying Adwen.