The bank will become the fifth largest in the GCC with 420 billion UAE dirham ($114.35 billion) in assets with increased productivity and economies of scale expected to boost profitability, the statement said.
Lower oil prices and weak economic growth is pushing consolidation across the Gulf.
The merger, first announced in September, was unanimously recommended to shareholders by the boards of ADCB and UNB, the banks said in a joint statement.
The tie-up is expected to take effect in the first half of 2019.
It will involve a statutory merger between ADCB and UNB. ADCB will issue 0.5966 shares for every UNB share, corresponding to a total of 1.64 billion new shares issued to UNB shareholders and valuing UNB at nearly $4 billion.
Al Hilal Bank will operate as a separate Islamic entity within the merged bank.
"The Abu Dhabi government is continuing its restructuring efforts to create stronger entities with a strong financial base to grow globally," said Tariq Qaqish, managing director of asset management at Menacorp.
Abu Dhabi Investment Council (ADIC), a government investment arm, is the majority shareholder in ADCB and UNB, both listed in Abu Dhabi. Unlisted Al Hilal is wholly owned by ADIC, which is now part of Mubadala Investment Company.
On the date the merger takes effect UNB shares will be delisted from the Abu Dhabi Securities Exchange, with the combined bank retaining ADCB's identity and legal registrations.
The combined entity will acquire Al Hilal Bank for 1 billion dirhams ($272 million) by issuing a mandatory convertible note for up to 117.6 million post-merger ADCB shares to ADIC.
ADCB on Tuesday reported annual profit of 4.84 billion dirhams, up from 4.28 billion a year earlier.
After completion of the merger, ADIC will own 60.2 percent of the combined bank, other ADCB shareholders owning 28.0 percent and other UNB shareholders holding 11.8 percent.
As reported by Reuters on Monday, Eissa Mohamed al Suwaidi, chairman of ADCB, will retain the same post at the new bank, as will ADCB CEO Ala'a Eraiqat.