(Recasts, adds analyst quote)

PARIS, June 30 (Reuters) - Airbus Group and Safran pledged on Thursday to make Europe competitive in the face of U.S. low-cost rival SpaceX as they completed a deal to merge their space launcher activities.

The two aerospace groups said they were closing a deal that paves the way for the next generation of European rocket, the Ariane 6, which will make its first flight in 2020 and be used to put commercial and military satellites into orbit.

The long-awaited deal calls for the integration of industrial assets, turning their existing Airbus Safran Launchers venture into an operational concern with 8,400 employees in France and Germany.

The heads of both companies pledged to focus on making the venture competitive after Europe's position in the commercial launch market was threatened by Elon Musk's Space Exploration Technologies, or SpaceX, which intends to offer cut-rate launch services by re-using its rockets.

Under the final deal, French engine maker Safran will pay Airbus Group 750 million euros ($832 million) to ensure an equal 50/50 ownership split in the new venture -- slightly less than a previously expected figure of 800 million..

"They needed to complete this deal so that they are ready to design an entire launcher for civil customers rather than government requirements, forcing the agencies to accept what they have done for their customers rather than work with what governments want," an analyst said, asking not to be named.

The deal had earlier been held up for months as the two companies and the French government debated how the payment to Airbus should be treated for tax purposes.

French tax regulations are not easily applicable to a partnership of equals in which both companies view the stake as strategic, and are locked in for the long term, so a compromise was reached sparing Airbus a hefty tax bill.

Separately, the Safran board will meet on Thursday to make a preliminary selection from a dozen offers for its Morpho biometrics and security business, sources told Reuters on Wednesday.

($1 = 0.9015 euros) (Reporting by Tim Hepher; editing by Michel Rose and Keith Weir)