SEOUL (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 highlighted 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," HD Hyundai Heavy's parent company said in a statement.

As South Korea's top builder of naval vessels, Hyundai wants to combine its expertise and technology in the field with Mipo's docks, facilities and skilled workers.

"The company aims to quickly seize opportunities in the rapidly growing global defence market," it said.

The two companies also aim to expand market share in the segment for ice breakers, tapping growing demand in the Arctic.

U.S. President Donald Trump's recently passed tax and spending bill earmarks more than $8.6 billion to increase the U.S. Coast Guard icebreaker fleet in the Arctic, where Washington hopes to counter growing Russian and Chinese dominance.

The deal proposed an exchange ratio of one HD Hyundai Mipo share for every 1.04059146 HD Hyundai Heavy shares, the companies said in exchange 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.

Trump has been pushing to revive the struggling U.S. shipbuilding industry to counter China's growing strength in maritime manufacturing and naval dominance.

South Korean officials have said that pledges by Seoul to help support America's shipbuilding sector were a critical factor persuading Washington to agree in July to a trade deal to cut threatened tariffs on Asia's fourth-largest economy to 15%.

Shipbuilding also featured in discussions between South Korean President Lee Jae Myung and Trump at their summit this week.

Hyundai and other South Korean shipbuilders announced a series of U.S. investment plans on the sidelines of the summit, as Seoul seeks to leverage its shipbuilding capability to ease pressure from Trump on trade and security issues.

President Lee touted shipbuilding cooperation during his visit on Tuesday to a U.S. shipyard acquired by South Korea's Hanwha Group.

South Korea has pledged to invest $150 billion in the U.S. shipbuilding sector, as part of $350 billion of investment funds the Asian country agreed to put into U.S. projects in return for winning U.S. tariff cuts in late July.

(Reporting by Heejin Kim and Hyunjoo Jin; Additional reporting by Jihoon Lee; Editing by Ed Davies and Ros Russell)