(Adds details on deal, quotes) SYDNEY, Oct 19 (Reuters) -...

(Adds details on deal, quotes)

SYDNEY, Oct 19 (Reuters) - Australia's Tabcorp Holdings (TAH) said it agreed to a A$6.36 billion ($4.87 billion) takeover of Tatts Group (TTS) to create a A$10.44 billion betting industry giant that could help fend off popular online rivals.

Tabcorp, the smaller of the two companies by market value, will offer 0.8 Tabcorp share plus A$0.425 in cash for each Tatts share. That implies a value of A$4.34 per share, representing a 20.8 percent premium to the most recent Tatts closing price of A$3.59 per share. Tatts said it would pay a fully-franked A$0.20 a share special dividend immediately before completion of the deal in lieu of part of the cash portion of the bid.

Australia's two largest non-casino gambling companies are struggling to cope with mounting competition from online betting agencies that have taken off since the deregulation of gambling licences in 2012, and both reported profit falls in August.

"In today's rapidly changing landscape, bringing together our businesses will create a strong and diversified business that is well placed to invest, innovate and compete, both in Australia and globally," Tabcorp Chairman Paula Dwyer said in a statement.

The combined group will have diversified national wagering, media, lotteries and gaming operations.

The companies said the combination was expected to deliver A$130 million a year in annual earnings before interest, tax, depreciation and amortisation synergies and business improvements in the first full year following the integration.

Tatts Chairman Harry Boon said the offer fairly reflected the strategic value of his company, and the merger would benefit the horse racing industry by offering more liquid wagering pools.

The deal, which has been recommended by both boards, remains subject to regulatory approval and a Tatts shareholder vote. AustralianSuper, one of Tatts' largest shareholders, has indicated it plans to vote in favour of the deal, which requires the approval of 75 percent of Tatts shareholders. ($1 = 1.3050 Australian dollars)