Shanghai Power Transmission & Distribution Co Ltd said on Friday it would be acquired by its Hong Kong-listed parent, Shanghai Electric , through a share swap aimed at boosting competitiveness.

Under a proposal, Shanghai Electric would buy shares it does not already own in Shanghai Power by issuing new domestic currency A shares to Shanghai Power shareholders, it said in a statement.

The acquisition -- the latest in a series among state-run Chinese companies -- would create a group with a combined market capitalisation of $7.3 billion, according to Reuters calculations.

The plan, which is subject to shareholder approval, is aimed at diversifying and strengthening Shanghai Power and Shanghai Electric's operations, Shanghai Power said.

Shanghai Electric, which recorded a compound annual earnings growth rate of 37.2 percent between 2004 and 2006, would achieve a listing on the Shanghai bourse after the merger, while Shanghai Power will be delisted, the statement said.

"Becoming Shanghai Electric's shareholders would allow us to share in its steady growth and returns over the long term," it said.

Each Shanghai Power share can be exchanged for 7.32 new shares to be issued by Shanghai Electric at 4.78 yuan ($0.634) each, it added.

Shanghai Power shareholders would also have the option to receive 28.05 yuan in cash for each share they hold.

Shanghai Power shares last traded at 28.05 yuan apiece, while Shanghai Electric shares last closed at HK$3.51 each.

Trading in Shanghai Power shares has been suspended since Aug. 9 pending an announcement. ($1=7.543 Yuan)