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UK engineering software firm Aveva is to merge with the software arm of French energy group Schneider Electric, creating a company worth about £3bn.

Under the terms of the deal, Schneider will take a majority stake in Aveva, which will retain its base in Cambridge and stay listed on the Stock Exchange.

Aveva employs 1,700 people worldwide and grew out of Cambridge University in the 1960s - pioneering 3D design.

Schneider has been in the software business for more than 50 years.

Aveva's shares rose 27% to £24.38 after the announcement, valuing the firm at £1.56bn.

This was Schneider's third attempt in three years to combine the companies.

Analysis: Simon Jack, business editor

French company buys UK company. Vote of confidence in post Brexit UK, or pilfering crown jewels at a knockdown price thanks to fall in sterling after the referendum?

This was the question asked when Japan's Softbank bought Britain's biggest tech company, ARM Holdings, in the immediate aftermath of the Brexit vote. The two transactions are very different.

First, Softbank committed to doubling ARM's UK based workforce over five years - there is no such commitment here. In fact, there were immediate warnings from Aveva and Schneider that job cuts may be needed to produce savings.

Second, Schneider and Aveva have tried to tie the knot twice before. Both of those occasions were pre-referendum, so it's hard to argue this is an opportunistic raid on a company that happens to be cheap thanks to the weak pound.

However, there are similarities. Both businesses are based in Cambridge and are indeed jewels in the UK's technology crown. Both make more than half their money in foreign currencies and are less exposed to the UK economy's uncertain prospects.

Both companies are knowledge-based and do not send many tangible goods across the UK-EU border. There was a fear that the fall in sterling would create a stampede of foreign buyers for UK businesses. It never materialised - thanks, according to merger experts I speak to, to the ongoing uncertainty over the UK's post-Brexit trading relationships.

Nevertheless, UK companies that fit the above "goldilocks" profile look cheaper than a year ago - particularly to European buyers.

The combined company will cover a wider range of sectors, combining Aveva's experience in oil and gas and power and Schneider's reach in the chemicals, food and beverage industries.

It will also have a greater global reach, with Schneider's exposure to North America added to Aveva's existing markets.

Aveva chairman Philip Aiken said the deal would create "a global leader in industrial software" while his Schneider counterpart Jean-Pascal Tricoire said it would produce "the right environment and structure for the software teams to aggressively develop their business".

Aveva has recommended the deal to its shareholders and it is expected to be completed by the end of 2017.

A total of £550m from Schneider and £100m of excess cash from Aveva will be distributed to existing Aveva shareholders when the deal goes through.

A number of UK technology firms have done deals with overseas companies in recent years.

In 2014, Google bought UK artificial intelligence start-up DeepMind, while last year ARM Holdings was sold to Japan's Softbank for £24bn.