US-based solar power systems manufacturer Westinghouse Solar has entered into a letter of intent to pursue a business merger with Australian renewable energy firm CBD Energy.

Current shareholders of CBD Energy will own 85 per cent of the combined company, with the Westinghouse Solar shareholders owning the remaining 15 per cent, according to Energy Business Review.

Key terms of the transaction have been approved by the boards of directors of both companies, pending the completion of due diligence and definitive agreements.

The companies are planning to close the all-stock deal in the third quarter of this year, subject to shareholder approvals and other closing conditions.

Westinghouse Solar CEO Barry Cinnamon said the merger will produce synergies between the two companies and create a larger, diversified business with competitive advantages in the renewable energy sector.

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