From January 2008, the joint venture will combine the sales, marketing and distribution (via ODS) businesses of all titles for Studio Canal and Universal Pictures France. The new entity will be named Universal Studio Canal Video GIE.
The announcement was made by UPIE president Eddie Cunningham and Studio Canal CEO Olivier Courson.
The company will draw on both libraries (Studio Canal's boasts more than 5,000 titles) and will create a video-dedicated sales force.
France has a $2bn (Euros 1.5bn) home entertainment market and the new company will be the market leader - Universal is currently the second-highest performing distributor in the French home entertainment market.
Also, the companies have extended an existing arrangement established in 2003 - until 2010 - for various international territory distribution of Studio Canal DVDs.
Rodolphe Buet of Studio Canal said: 'This new joint venture will now be the major source for all forms of video exploitation. It's a great opportunity to maximize the release of all of our new films and also give our library titles a real boost in a mature video market.'
Eddie Cunningham, president UPIE, added: 'This joint venture will produce the leading home entertainment distribution entity in France, distributing two first-class new release slates and some of the most exciting and world-renowned catalogue movie titles'.