PARIS (Reuters) - France and Italy agreed a deal on Wednesday giving Italy's Fincantieri (>> Fincantieri SpA) effective control over French shipbuilding firm STX France under shared ownership and strict conditions, ending a dispute that had soured bilateral relations.

The two countries also announced their intention to study, by June 2018, a possible merger of French military shipyards company Naval Group with Fincantieri, the French Presidency said, confirming a Reuters report.

Under Wednesday's agreement, Fincantieri will take 50 percent of STX, the French state 34.34 percent, Naval Group 10 percent, STX staff 2 percent and STX local suppliers 3.66 percent.

In order for STX to get effective control at 51 percent, the French state will lend it a one percent stake.

Paris has, however, a right to demand back that 1 percent stake if Fincantieri does not honour commitments on employment, governance or intellectual property.

Naval Group, formerly DCNS, designs and produces France's submarines and surface ships. The company is owned by the French state while French defence company Thales (>> Thales) owns a 35 percent stake in the company.

France had angered Italy by ordering a "temporary" nationalisation of STX, cancelling a deal in which Fincantieri and another Italian investor had agreed to buy 55 percent.

(Reporting by Jean-Baptiste Vey, Gwenaelle Barzic, Writing by Dominique Vidalon; Editing by Richard Lough)

Stocks treated in this article : Thales, Fincantieri SpA