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UPDATE 1-Finland's Metso merges minerals technology arm with Outotec

Tarmo Virki

(Adds quotes, details, shares)

HELSINKI, July 4 (Reuters) - Finnish engineering group Metso is merging its main minerals technology business with smaller rival Outotec, Metso said on Thursday, sending shares in both companies higher.

Outotec shares were up 29 percent, while Metso's were up 4.6 percent in early trading on the Helsinki bourse.

The new company, to be called Metso Outotec, will be one of the leading technology suppliers to minerals processing companies globally, Metso said, adding combined sales would have totalled 3.9 billion euros ($4.4 billion) in 2018.

"The combination will be implemented through a partial demerger of Metso, in which all assets and liabilities of Metso that relate to Metso Minerals will transfer to Outotec in exchange for newly-issued shares in Outotec to be delivered to Metso shareholders," Metso said in a statement.

On completion of the deal, Metso shareholders will own approximately 78% of the shares and votes in Metso Outotec, with existing Outotec shareholders holding the remainder.

In addition, Metso shareholders will retain their current shares in Metso, which will be renamed Neles. Neles' 2018 sales would have totalled 593 million euros.

"This is an industry-shaping combination that joins two uniquely complementary companies. It builds on Outotec's leading technology competencies and Metsos excellent service capabilities," Outotec's Chairman Matti Alahuhta said.

($1 = 0.8865 euros) (Reporting by Tarmo Virki; Editing by Niklas Pollard and Mark Potter)