The boards of Standard Life and Aberdeen Asset Management have agreed and recommended a merger with the former owning 66 per cent of the new business.
After reports emerged over the weekend, the firm's boards have backed a coming together in an all-share merger.
The new firm - which will have £357bn in insurance assets and £660bn in asset management, will be co-lead by Aberdeen chief executive Martin Gilbert and his counterpart at Standard Life, Keith Skeoch.
In terms of AuM the two asset management business are evenly matched and will now bring together Aberdeen's emerging market and Asian focus with Standard Life's behemoth in Gars and its fixed income and UK equities business.
The insurance business brand will remain as Standard Life while negotiations are currently underway over the branding for the holding company and asset manager - but Mr Gilbert and Mr Skeoch said both names would be involved.
Standard Life chairman Sir Gerry Grimstone will become chair of the new board with Aberdeen chair Simon Troughton deputy-chair. The new board will be equally split between the firms.
On the asset management side, the new £660bn company will become the largest UK active manager and the second largest in Europe.
The deal, which has grown out of conversations from the start of the year, will see the asset management merger bring together the equities and fixed income arms - adding Aberdeen's passive focus and Standard Life's 'solutions' business.
Mr Skeoch said: "The real strength in this merger is about active management and what it being to 'next generation' solutions, and in a market with a lot of volatility, will become a bigger part of client needs."
The Standard Life head said the ideology behind the merger was not directly linked to the rise of passive investment hampering active managers.
He added: "This is not as black and white as active and passive. We will have complimentary products throughout the risk-return spectrum, and that's something very few combination of [fund] houses can do,
Mr Gilbert added: "If you divide it into components it is interesting. We're going to be a world class active equity and solutions business, very strong alternatives and property and then a world class fixed income business.
"Alongside that we still have a strong passive business. This gives us scale in all those areas rather than saying [one of the firms] is sub-scale."
Mr Gilbert and Mr Skeoch would not be drawn on job losses but the businesses highlighted significant savings across technology and distribution in its case to shareholders - amounting to some £300m.
Similarly, the pair could not say where investment rationalisation would take place.
The new firm will be headquartered in Scotland - and in the immediate term will bring together the 6,300 staff of Standard Life with the 2,000 of Aberdeen.
Mr Skeoch added: "The combination of our businesses will create a formidable player in the active asset management industry globally. We strongly believe that we can build on the strength of the existing Standard Life business by combining with Aberdeen to create one of the largest active investment managers in the world."
