SEOUL, Aug 27 (Reuters) - South Korea's HD Hyundai Heavy

Industries, the world's biggest shipbuilder, said on

Wednesday that it plans to merge with its affiliate HD Hyundai

Mipo as it targets a bigger slice of the U.S.

shipbuilding market.

With the merger, the company said it aims to lead U.S.-Korea

shipbuilding cooperation projects touted during a recent summit

between the leaders of the countries that Seoul has dubbed "Make

American Shipbuilding Great Again."

"Ahead of the full-scale launch of the MASGA project

following the Korea-U.S. summit and as countries around the

world are strengthening naval power, demand for K-defence is

expected to increase further," the company said in a statement.

The deal proposed an exchange ratio of one HD Hyundai Mipo

share for every 1.04059146 HD Hyundai Heavy shares, the

companies said in filings.

The merged company will be launched in December.

Ahead of the announcement, shares of HD Hyundai Heavy

Industries surged 11.3% and HD Hyundai Mipo

jumped 14.6% to close at record highs, while other

shipbuilding stocks also rallied on hopes around the MASGA

project.

(Editing by Heejin Kim and Hyunjoo Jin; Additional reporting by

Jihoon Lee

Editing by Ed Davies)