The agreement, struck on the eve of the Paris airshow, will create a combined group with sales of 10bn euros and 53,000 employees. It will also be the biggest single partner in both the Airbus civil aircraft programme and the Eurofighter project.
DASA, which failed to merge late last year with British Aerospace, will be the senior partner in the merged group with a shareholding of between 86.5 and 88.5 per cent. SEPI, the state-owned holding company which owns Casa, will hold the remaining stake.
BAe, Aerospatiale Matra of France and Alenia of Italy had all been vying with Dasa to merge with the Spanish company. The Spanish industry minister Josep Pique held out the prospect of other aerospace firms joining in: "It is a deal open to everyone and it favours the European integration project."
Although BAe is buying GEC's Marconi defence electronics business and Aerospatiale and Matra have joined forces in France, the Dasa-Casa deal is the first full-blown cross border merger between two aerospace companies.
Dasa's chief executive, Manfred Bischoff, said the merged business was in an excellent position to spearhead further European consolidation and increase the success of the Airbus programme.
The merged company will own 42.1 per cent of Airbus, 43 per cent of the Eurofighter programme and 12.3 per cent of the Ariane space programme.
The agreement also removes one of the obstacles to the planned transformation of Airbus into a single corporate entity with shareholders and a conventional capital structure.
The original intention of European governments was to create a single aerospace and defence company embracing all the major players in Britain, France, Germany, Italy, Sweden and Spain. But that now looks less likely. Instead, there could be two or three groupings centred around the BAe- Marconi combination and rival French and German alliances.