US chemicals and fluids companies Quaker Chemical and Houghton International are to merge, creating a world leader in the metalworking and primary metals industries.

Under a definitive agreement, shareholders of Houghton International will receive $172.5 million in cash and a 24.5% stake in the new entity, which represents around 4.3 million shares of newly issued Quaker Chemical stock. In addition, Quaker Chemical will assume Houghton’s net debt of about $690 million as at year-end 2016. The companies have similar-sized revenues, with Quaker posting sales of $747 million in 2016 while Houghton’s totalled $767 million.

The deal has been approved by both company’s board of directors, with full support from the Hinduja Group, which will become Quaker Chemical’s largest shareholder. Hinduja is an Indian conglomerate that holds more than 95% of Houghton’s equity.

Quaker Chemical has secured financing of $1.15 billion from Bank of America Merrill Lynch and Deutsche Bank Securities to support the transaction, which includes $200 million of additional liquidity for future needs.

Michael Barry, chairman and CEO of Quaker Chemical, said the proposed deal combines two highly complementary businesses. The merged company will have one of the world’s most expansive metalworking platforms, which is expected to generate significant cross-selling opportunities and allow further expansion into growth markets such as India, Korea, Japan and Mexico.

Synergies amounting to approximately $45 million are expected, driven mostly by supply efficiencies and cost reductions, the majority of which should be realized within two years of completion.

The transaction is expected to close by the end of 2017 or early 2018 and remains subject to customary closing conditions, including regulatory clearance and approval by Quaker Chemical shareholders.

The companies will continue to operate independently until the acquisition is finalized. It is expected that once completed, the new company will have a 12-member board of directors comprising nine from Quaker Chemical and three to be nominated by the Hinduja Group. Barry will remain as chairman and CEO of the new business.