By Melanie Burton and Roshan Thomas

MELBOURNE (Reuters) -Australia's Sayona Mining will buy U.S.-based Piedmont Lithium in an all-stock deal that will consolidate its Canadian operations and strengthen its exposure to the North American electric vehicle sector, the companies said on Tuesday.

Under the deal, the two companies will merge to create a lithium business, with Sayona becoming the parent entity. Under the all-share transaction, Sayona is paying a 6% premium for Piedmont, based on their closing share prices on Monday.

The deal marks the latest by lithium companies to cope with a market that is reeling from rapid supply growth that has outpaced strong demand projections, as the adoption of electric vehicles has been slower than expected.

Following separate capital raisings by each company, the combined entity will have an estimated pro-forma market capitalisation of $623 million, with shareholders of the two companies owning it approximately evenly, the companies said.

"We are excited about the opportunities this merger presents to accelerate our growth plans and enhance our strategic flexibility," Sayona CEO Lucas Dow said in a statement.

Sayona will raise A$40 million ($26.04 million) through a capital raise and A$69 million through a conditional placement of shares to private equity firm Resource Capital Funds (RCF). Piedmont will issue shares worth $27 million.

The companies have a joint venture in Quebec, North American Lithium (NAL), which finished ramping up in June and is targeting 226,000 metric tons a year of spodumene concentrate production, of which it will sell half to Piedmont.

NAL operated at a loss in the September quarter, according to Sayona. The simplification of its structure in a merged entity would make it easier to accept government or customer support, if needed, a fund manager said. Piedmont's customers include South Korea's LG Chem.

Piedmont is also developing a project in North Carolina and is working on spodumene assets in Ghana with Australian-listed Atlantic Lithium. Sayona also has lithium holdings in Western Australia.

Expectations have grown for further consolidation in the beleaguered sector after Rio Tinto's $6.7 billion bid for Arcadium Lithium last month.

($1 = 1.5378 Australian dollars)

(Reporting by Roshan Thomas and Rajasik Mukherjee in Bengaluru; Editing by Abinaya Vijayaraghavan and Sonali Paul)