The acquisition is being financed through a combination of equity contributed equally by Blackstone and PAI funds and debt financing. United Biscuits will be owned equally by both companies.
United biscuits are the leading European manufacturer of biscuits and snacks and is number one in the UK with brands such as McVities and Jacobs under its belt. UB also holds joint number one position in the Netherlands market and is number two in the markets of France and Belgium.
"We are attracted to United Biscuits' market position as well as its existing and new product lines. We look forward to partnering with the strong management during this next step of the company's evolution," said David Blitzer, senior managing director of Blackstone.
Betrand Meunier, senior partner of PAI welcomed the new partnership.
"We fully support their strategy to continue to develop market positions through new product development and selected acquisitions," he said.
The sale of Britain's premier biscuit manufacturer, which produces both the McVities and Penguin brands, follows a bitter competition with rival Premier Foods, which had to pull out of the race after backing worth £250m (€371m) from Lion Capital was withdrawn, reports in the Financial Times suggested.
This is the latest confectionery company to be bought by a private equity group following a similar acquisition by Lion Foods of Kettle Crisps.
UB currently owns a quarter of the British biscuit industry and in April announced a year-end profit jump of £204m (€301) - up from 2004's £163m (€241m).
The Blackstone Group is a global private investment and advisory firm and has raised more than $67 billion for alternative asset investing since its formation of which approximately $30 billion has been for private equity investing.
PAI is a leading European private equity firm which manages and advises dedicated buyout funds with an aggregate equity value of over €7bn.