Nissan is to take a 34% stake in Mitsubishi, making it its biggest shareholder.

The deal is valued at 237 billion yen (1.9 billion euros) and will extend a current collaboration between the carmakers for the past five years.

The partnership will see the two cooperate on areas including purchasing, common vehicle platforms, technology-sharing, joint plant utilisation and growth markets.

The announcement follows the news last month that fuel efficiency on models sold in Japan had been overstated.

Carlos Ghosn, chief executive and president of Nissan, said: “This is a breakthrough transaction and a win-win for both Nissan and Mitsubishi Motors. It creates a dynamic new force in the automotive industry that will cooperate intensively, and generate sizeable synergies. We will be the largest shareholder of MMC, respecting their brand, their history and boosting their growth prospects. We will support MMC as they address their challenges and welcome them as the newest member of our enlarged Alliance family.”

Osamu Masuko, chairman of the board and chief executive of Mitsubishi Motors Corporation, added: “This agreement will create long-term value needed for our two companies to progress towards the future. We will achieve long-term value through deepening our strategic partnership including sharing resources such as development, as well as joint procurement.”

The transaction is expected to close by the end of the year, subject to the signing of a definitive Alliance Agreement, expected by the end of May, 2016, the signing of a shareholders agreement with the current Mitsubishi Group shareholders of MMC and regulatory approvals.

Nissan added that it would gain proportional representation on the Mitsubishi board under the deal, including a Nissan nominee to become chairman.