The £220 million deal will give the enlarged business a 30 per cent share of local newspaper circulation in Britain.
Trinity, the owner of the Daily Mirror, hailed the deal as it will give advertisers "greater reach and a more efficient footprint of regions from which to advertise to their target audiences".
The larger group will also have 120 million monthly unique browsers and 790 million monthly page views.
Trinity Mirror shares jumped 9 per cent on confirmation of the deal.
Trinity already owned 20 per cent of Local World, which includes the former Northcliffe Newspapers titles belonging to Daily Mail & General Trust and the Iliffe regional papers.
The £220 million valuation includes debt, leaving the non-Trinity shareholders to collect £154 million and they will all sell their stakes.
DMGT, the largest shareholder, owned 38.7 per cent of Local World and will receive £73 million cash.
Montgomery, the former News of the World editor who is credited with more than doubling the value of Local World since its formation three years ago, owned a 5 per cent stake worth an estimated £9.5 million. He will quit the business.
Odey, the hedge fund led by Crispin Odey, the former son-in-law of Rupert Murdoch, controlled 3.5 per cent, worth about £6.5 million.
Trinity Mirror plans to raise £35 million from the stock market to fund the deal and will hold a special general meeting for shareholders to approve the deal.
Simon Fox, chief executive, said: "Today is a good day for local media. It is a vote of confidence in local press and its future."