ATHENS, June 25 - Greek jewellery retailer Folli Follie (FOLr.AT) said it had decided to merge with its duty-free unit HDFS and department store operator Elmec to improve efficiency.

Folli, which sells products ranging from luxury goods to apparel in Europe and Asia, said its board and the boards of HDFS (HDFr.AT) and Elmec (ELMr.AT) proposed to shareholders the merger of the three firms.

Hellenic Duty Free Shops (HDFS), in which Folli holds a 56.8 percent stake, will absorb Folli and its 95.6 percent subsidiary Elmec, Folli said in a statement late on Thursday.

"This decision will contribute to the simplification of the group's structure, improve efficiency ... strengthen the balance sheet," said Folli CEO George Koutsolioutsos.

Folli's shareholders will exchange one share for 1.5355 shares of the new entity that will be formed. HDFS shareholders will exchange one share for 0.4325 shares and Elmec's shareholders one share for 0.0621 shares.

The group operates a network of about 700 points of sale in over 30 countries around the world. It had a profit of 26 million euros ($34.88 million) in the first quarter this year.

(Reporting by Angeliki Koutantou; Editing by Michael Shields))