Germany's Hapag-Lloyd said on Monday it would buy Israel's ZIM Integrated Shipping Services for $4.2 billion in cash to secure its position as the world's fifth-largest shipping group.

Shares of ZIM jumped over 19% in overnight trading.

Hapag-Lloyd's HLAG.DE shares fell by 8% on news of the ZIM deal, which it said would be funded through its cash reserves and external financing of up to $2.5 billion.

"The merger would secure Hapag-Lloyd's market position as the fifth-largest shipping line in the world with a modern fleet of over 400 vessels," the company said in a statement.

ZIM says on its website it has operations in more than 90 countries serving 300 ports worldwide.

In a related deal, Israeli private equity fund FIMI will acquire a business with 16 vessels carved out from ZIM that secures direct global maritime connections for Israel.

FIMI and Hapag-Lloyd did not disclose the financial terms of this nested deal, under which a "golden share", which gives Israel special ownership rights in ZIM, will be transferred to FIMI's dedicated Israeli container line, to be called "New ZIM".

The price struck with Hapag-Lloyd represents a 126% premium over its unaffected stock price on August 8, before initial reports of takeover interest, ZIM said.

ZIM MANAGERS IN TALKS WITH UNION OVER STRIKE

ZIM staff called a strike at its headquarters in Haifa on Sunday over the deal, ZIM told Reuters, adding that management was in talks with their union to avert any negative impact.

JPMorgan analysts said the deal would allow Hapag-Lloyd to increase its global market share from 7% to just under 9% without having to boost investment in a drawn-out process.

ZIM, valued at almost $2.7 billion as of Friday's close, said in November it had been reviewing its strategic options for several months after receiving a non-binding takeover proposal.

"This can be considered as a play to gain extra capacity near term (in lieu of fleet capex) ... Delivery slots at shipyards are not readily available near term," JPMorgan said.