LG Industrial, which makes electric power plants and equipment, said in a statement the merger with LG Metals, South Korea's only refined copper producer, will occur by May 1, 1999.

The new company, which has yet to be named, will be capitalised at 148.1 billion won ($122 million) and its sales are expected to total 3.7 trillion won ($3.06 billion), the statement said.

LG Industrial's sales totalled 1.67 trillion won in 1997, while LG Metals' sales were 2.02 trillion won.

"The merger is the first merger case of related businesses within conglomerates' non-core business firms after the LG Group promised the government early this week it would go ahead with its restructuring programmes," LG Industrial said.

LG Group was one of South Korea's top five family-run conglomerates which agreed earlier this week to have the number of companiesthey control and raise a total of 70 trillion won.

LG Industrial's debt-to-equity ratio was 551.2 per cent at the end of 1997 and LG Metals' ratio was an astonishing 12,967 per cent.

The government wants Korean companies to reduce their debt ratios to below 200 per cent by the end of 1999.

The statement said that one LG Industrial share will be equal to 0.7729 shares of LG Metals. The two companies are subsidiaries of the LG Group.LG Metals, which is the world's fifth largest refined copper producer, also produces gold and silver bullion.

"The merger is one of our group's restructuring efforts andaims to expedite LG Metals' deals with foreign investors," a company source said.LG Metals has been negotiating with Japanese firms to lure foreign investment either by selling assets or a majority stake in the company, industry sources said.

The Japanese firms included Nippon Mining & Metals Co Ltd, Marubeni Corp and Mitsui Mining and Smelting Co Ltd, they said.

The merger decision came after an LG Groupsenior official's visit to Tokyo this week, sources said.

One version of LG Metals' deal, which surfaced on the market right after the merger announcement, was that the foreign buyers and the LG Group may establish a joint venture company in Seoul to take over LG Metals' plants in Onsan, industry sources said.

LG Group may have a minor stake in the new joint venture and the foreign buyers the remaining majority stake, they said.

LG Metals' Onsan plants have a 350,000-tonne smelting capacity and 360,000-tonne refining capacity per year.

The Onsan plants were believed to be worth about $1.0billion based on their production capacity, they said.

LG Metals also has plants in Changhang with an annual 60,000-tonne refining capacity.