HWA will run a Formula 2 team alongside its DTM and Formula E-supporting programmes after purchasing Arden's entry, cars and equipment ahead of the 2020 season.
HWA has a long history with Mercedes after running its DTM programme until that ended in 2018, having also run the team which has now become Mercedes in Formula E in 2019/20.
But in recent years the team has branched out into customer racing, aiding the R-Motorsport Aston Martin DTM team while making its first foray into junior single-seaters this year in FIA Formula 3.
Jake Hughes took seventh in the championship in the team's first year, recording a win at the Red Bull Ring.
Arden won two races in 2019 with the late Anthoine Hubert – who Motorsport.com understands was favouring re-signing with the team for 2020 – with the help of a technical partnership which included HWA engineers to work with Renault junior Hubert and Alfa Romeo junior Tatiana Calderon.
"We are looking forward to this challenge in another formula series for young drivers," said HWA CEO Ulrich Fritz.
"Alongside our involvement in the FIA Formula 3 Championship, we are now represented on the next level of the FIA Formula pyramid, ensuring a continuous development of talented motorsport youngsters.
"It is also further evidence of the 360 degree motorsport expertise of HWA. From the promotion of young drivers in Formula E to DTM and GT racing, we now cover an incredibly broad spectrum."
Sergio Perez, Sebastien Buemi, Heikki Kovalainen, Eduardo Mortara and Jolyon Palmer are among the drivers who have competed for Arden in the past. It raced in every season of GP2, F2 and GP3 on the Formula 1 support bill from 2005 to present day.
Arden CEO Garry Horner, father of Red Bull F1 team boss Christian, who co-founded the team, said the squad would use this juncture to "explore other avenues".
It currently competes in the Formula Renault Eurocup and British F4.
"Arden has successfully competed in the premier F1 feeder series for over 20 years and we have now decided to step back from the category in order to explore other avenues," said Garry Horner.
"We have enjoyed our time in the (GP2 and) F2 Championships and, at some point in the future, may consider returning to the grid. Never say never…"
Arden F2 team boss Kenny Kirwan will move over and head up the new HWA F2 team.
"This latest development is really very exciting news and will allow us to make another leap forwards in terms of development and performance," said Kirwan, who has overseen the Arden F2 team for the last three years.
"The Arden and HWA partnership has worked extremely well this season and our intention is to close this chapter with victory in Abu Dhabi."
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