The new entity will be launched on Sept. 1 after approval from shareholders in July. It will be named Samsung C&T Corp. to "reflect the brand's global recognition and historic value."

The combined company is expected to post annual revenues of about 60 trillion won ($54.7 billion) in 2020, a sharp rise from the two's annual revenues of 34 trillion won in 2014.

Jay-yong will hold a 16.5 percent stake in the new entity, with his two sisters -- Boo-jin and Seo-hyun -- each owning 5.5 percent.

Samsung said the planned merger is designed to "create synergy by combining their construction businesses as "Samsung C&T's global network will help develop new opportunities overseas for Cheil's fashion, resort and catering businesses."

"This merger is a strategic decision to help us pre-emptively secure core competencies and grow as a leading global company that can provide integrated premium lifestyle services," said Yoon Ju-hwa, who heads Cheil Industries.

Choi Chi-hun, CEO of Samsung C&T, echoed his view.

"It will give us an opportunity to diversity our business portfolio and find new growth drivers in the areas of fashion and biotechnology. Samsung C&T's capabilities to manage businesses globally, when combined with Cheil's expertise, will help us become more competitive."

Industry watchers, however, said it comes in line with the group's bid to pave the way for a stable succession of power from the elder Lee, South Korea's richest man, to his son.

With Jay-yong standing as the largest shareholder of the new Samsung C&T, it is expected that his sway over Samsung Group will expand further.

Currently, Cheil Industries stands at the top of the group's management system through a cobweb-like ownership structure. The group's key affiliates, which include Samsung Life Insurance Co., Samsung Electronics Co., Samsung SDI Co. and Samsung C&T are intertwined through complex stock holdings.

Thus, even though Jay-yong only holds a 0.57 percent stake in Samsung Electronics, the latest merger proposal will help the heir apparent to expand his control over the tech giant as well.

Earlier this month, Jay-yong was also appointed to take the helm at the Samsung Life Public Welfare Foundation and the Samsung Foundation of Culture, the group's key foundations that were originally headed by his father.

The two foundations also hold stakes of 2.18 percent and 4.68 percent in Samsung Life Insurance, respectively.

The group has also restructured its operations, selling four petrochemical and defense units to Hanwha Group last year. Samsung SDS Co. was also listed on the main bourse, a move viewed by many as a means for Jay-yong and his sisters to generate cash that would fund the inheritance tax for the group's managerial transfer.

The move is also seen as the group's bid to roll out a full-fledged holding firm.

"The merger between Cheil Industries and Samsung C&T has been widely expected," said Park Joon-sun, an analyst at Kiwoom Securities Co., adding the launch of the new holding firm may come within this year.

Analysts expect the group's mainstay Samsung Electronics may be divided into two segments, which each specializes in investment and business, and the former will be merged into Cheil Industries.

Samsung Group, however, said it cannot comment on any of the market's speculation over the launch of a full-fledged holding firm.

The envisioned combination is also predicted to give the merged entity the largest stake in Samsung BioLogics Co., the biopharmaceutical arm, as Cheil Industries and Samsung C&T hold stakes of 46.3 percent and 4.9 percent, respectively.

Cheil Industries is a real estate developer and theme park company, whose business portfolio also covers construction, fashion and resorts.

Samsung C&T kicked off in 1938 as the first company of Samsung Group. It is divided into two major segments: construction and trading.

Shares of Cheil Industries spiked by the daily limit of 15 percent to 188,000 won on the main bourse, and Samsung C&T also soared by its daily permissible limit to 63,500 won. The announcement was made before the stock market opened Tuesday. The KOSPI shed 0.12 percent. (Yonhap)