SAO PAULO (Reuters) - Brazil's Petz said on Friday it had agreed to merge with rival Cobasi in a cash and share swap deal that would create the country's largest pet product retailer.

Shares in Petz jumped as much as 47% in Friday morning trade, reaching their highest level since last September before paring some gains to rise about 35%.

The deal would value Petz at 7.10 reais ($1.35) per share, more than double its closing price of 3.50 reais on Thursday, and would also include Cobasi paying 450 million reais in cash to Petz shareholders.

The combined company, which would bring together the two largest pet retailers in Brazil, could generate revenue of more than 7.5 billion reais in 2024, Petz CEO Sergio Zimerman said in a call with analysts. The group would own a total of 483 stores.

JPMorgan analysts led by Joseph Giordano wrote the deal has a "high synergy potential even in the context of its execution risks and challenges as seen in other mergers in the industry", adding the combined entity should have a market share of between 15% and 20%.

Petz said the deal would bring together companies with similar management models and strategies, while combining the businesses would strengthen the omnichannel operation, generate economies of scale and improve commercial strategy.

Zimerman said an estimate of potential synergies was not yet available.

Cobasi founder Paulo Nassar will be appointed as chief executive of the combined group, while Zimerman will be nominated as chairman.

According to the agreement, a non binding memorandum of understanding with a up to 90-day exclusivity period, the combined company would be owned 50% by Petz shareholders and 50% by Cobasi shareholders, a balance that can still be adjusted.

The deal depends on a definitive agreement and approval from Brazil's antitrust regulator.

Zimerman said that regulators could potentially order restrictions to the deal, but added he did not believe the merger would be barred. He also said the companies have no plans to take the combined group private.

The agreement between the companies was first reported by local news outlet Brazil Journal.

($1 = 5.2417 reais)

(Reporting by Andre Romani and Alberto Alerigi Jr.; Editing by Steven Grattan, Kirsten Donovan and Sharon Singleton)