Falck Renewables, whose shares are now unlisted, is to be folded into Falck's biomass, photovoltaic and waste-to-energy arm Actelios, whose shares trade on the Milan stock exchange.
Actelios chief executive officer Piero Manzoni explains that the deal would increase both the group's geographical and technological diversification.
This is expected to allow the new Actelios to better position itself against risks over changes in the regulatory framework in one nation or reliance on a single renewable energy technology.
Falck Renewables is active only in wind and has a portfolio of operational wind farms spread over the UK, Italy, France and Spain, and a pipeline in countries including Poland and Turkey. Although Actelios is involved in a range of businesses, it is only present in Italy.
Manzoni said the new group would be the fifth-largest European renewable energy company quoted on a stock exchange - though it is dwarfed by France's EDF Energies Nouvelles, which is in fourth position - and the largest in Italy.
It would move down a notch in both rankings should Enel Green Power, the renewable energy unit of Italian utility Enel, goes ahead as expected with an initial public offering later this year.
Actelios expects the merger with Falck Renewables to be completed in November.
While one of the aims of the new group is technological diversification, at least initially the new Actelios will be focused almost exclusively on wind.
According to 2009 pro-forma figures, the combined group in 2009 boasted total installed capacity of 454MW, of which 408MW is in wind.
A 2010-2014 business plan for the new Actelios group sees total installed capacity climbing to at least 1,132MW by 2014, with 1,028MW from wind.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) is seen rising from EUR95 million in 2009 to more than EUR200 million in 2014, while revenues should more than double in the same period, from EUR185 million to more than EUR400 million.
Investments of about EUR1.2 billion will be needed through 2014 to finance its growth plans. Following the merger, Actelios also plans to issue shares worth up to EUR130 million to help fund growth.