LONDON—Airbus Group SE and Safran SA on Thursday said they have concluded months of talks to establish a European rocket joint venture.

The two long-term partners in developing and building Europe's Ariane 5 space launcher are pooling assets to become more effective in the face of increasing competition.

Airbus and Safran decided to join forces in 2014 and formally set up a joint venture in January 2015 to gain efficiencies in the design and building of Europe's next major rocket, the Ariane 6. Negotiating the final agreement between the two European aerospace giants got bogged down in talks on how to reach parity between the companies.

Safran will make a €750 million ($833 million) payment to Airbus to gain an equal 50% stake, the companies said in a joint statement.

"With the closing of this agreement, Airbus Safran Launchers becomes fully operational and will focus all its efforts on delivering more competitive solutions to its customers," said Airbus Chief Executive Tom Enders.

Designers of the Ariane 6 rocket are aiming for lower costs than the existing Ariane 5, in the face of lower-cost rivals such as Elon Musk's Space Exploration Technologies Corp., which has been winning market share in the business to loft satellites into space. The Ariane 6 rocket is due for its first flight in 2020.

Airbus Safran Launchers are still in talks to expand their operations by taking full control of Europe's premier rocket-launch company, Arianespace. Airbus Safran Launchers already owns 39% of Arianespace and is seeking to acquire the 35% held by French space agency CNES to gain control of the business. The remaining stake is held by various partners involved in the Ariane rocket program.

The European Commission, the bloc's antitrust authority, said it was concerned the deal to take over Arianespace could lead to the merged entity discriminating against rival satellite manufacturers on pricing and access to launch services, reducing competitors' incentives to invest.

Write to Robert Wall at robert.wall@wsj.com

(END) Dow Jones Newswires

June 30, 2016 03:45 ET (07:45 GMT)