Under the complex deal, Sky will acquire all of the shares in Vodafone NZ for that sum in cash and shares, giving Vodafone Group a 51 percent stake in the combined group and a cash consideration of NZD 1.25 billion, to be funded through new debt.
The new Sky shares will be issued at NZD 5.40 per share, representing a 21 percent premium to Sky's last close. The shares jumped 20 percent toNZD 5.35 at Thursday's open.
"This is a significant and positive step in Sky's evolution as a premium entertainment company," Sky Chief Executive John Fellet said in a statement.
"The combined group will offer exciting new packages with Sky's premium entertainment content, Vodafone NZ's communications and digital services of the future."
Vodafone NZ has more than 2.35 million mobile connections and more than 500,000 fixed-line connections in New Zealand. Sky has over 830,000 subscribers.
The combined group will be one of the largest companies listed on the New Zealand stock exchange and will have forecast pro-forma revenue of NZD 2.9 billion.
"It's a very big deal for Sky TV and the market is going to take some time to digest it and work through the impact," said Forsyth Barr Investment adviser Adrian Vance.
Vance noted that Spark is under some pressure, down 6.7 percent on the uncertainty of the impact of this combined company.
Sky said it expected shareholders to vote on the deal at a meeting in early July.
© Thomson Reuters 2016