"The strategic cooperation with Daimler Truck as one of the world's largest commercial vehicle manufacturers reflects our strong position as an innovation driver and technology leader in the field of lithium-ion battery production," Manz CEO Martin Drasch said.

As part of the deal, Manz, which produces the machines needed to build batteries, will issue 774,408 new shares, to be bought by Daimler Truck at 39.53 euros apiece.

Shares in Manz were up 8.5% on the news.

Under the agreement, Manz is supposed to set up a pilot line for the production of lithium-ion battery cells as well as the assembly of batteries at Daimler Truck's Mannheim site.

"The two companies will combine their expertise to jointly develop innovative battery technology and associated production processes for trucks and buses," Manz said.

($1 = 0.9370 euros)

(Reporting by Christoph Steitz, Editing by Miranda Murray)