Hyundai Steel Co., South Korea's No. 2 steelmaker, said Wednesday that its board approved a deal to take over Hyundai Hysco Co., a move expected to increase synergy between the two companies.

The takeover deal was approved at a board meeting held earlier in the day, Hyundai Steel said in a regulatory filing.

Under the deal that needs to be endorsed in a shareholder meeting, Hyundai Steel will issue new shares and change them with those of Hyundai Hysco at a ratio of 1 to 0.8577. 

Hyundai Steel plans to complete the merger process by July 1.

"Through this merger, we expect to diversify our business portfolio, while at the same time enhancing business competitiveness by expanding the export portion through the overseas networks owned by Hyundai Hysco," Hyundai Steel said. 

"We also expect to run our business on more stable footing by improving management efficiency based on a unified system for the whole process ranging from securing raw materials to selling final products," it added. 

The move comes after Hyundai Steel merged with the auto steel sheet-making division of its affiliate Hyundai Hysco in January last year. 

It had sought to take over the other business of the company ever since. 

The two are supplying steel plates to Hyundai Motor Group, which holds Hyundai Motor Co. and Kia Motors Corp., the country's No. 1 and No. 2 automakers, under its wing.

Hyundai Steel and Hyundai Hysco reported 16.8 trillion won ($15.4 billion) and 4.2 trillion won in sales, respectively, last year, with their combined assets topping 30 trillion won.

With the merger, Hyundai Steel is expected to consolidate its market status by narrowing its gap with steelmaking leader POSCO Co., whose sales and assets came to 29.2 trillion won in sales and 52.6 trillion won in assets last year.

Shares of Hyundai Steel closed up 6.06 percent at 78,700 won and those of Hyundai Hysco jumped 8.16 percent to 67,600 won. (Yonhap)