LTV Corp., owner of Jones & Laughlin Steel Corp., yesterday proposed to acquire Republic Steel Corp., creating the nation's second largest steel producer, through an exchange of stock valued at more than $770 million.

Officials of the two companies said a merger of their steel businesses is necessary to produce a competitive, profitable operation in the face of intense worldwide competition.

Republic, the nation's No. 5 steel maker, headquartered in Cleveland, has been one of the industry's frailest producers, losing $239 million last year on sales of $2.7 billion.

LTV, a Dallas-based conglomerate, last year lost $299 million on its steel business and $155 million overall on sales of $4.7 billion, including $3 billion of steel. LTV's Jones & Laughlin subsidiary is the third largest steel producer, behind U.S. Steel and Bethlehem Steel. LTV is also in the aerospace, electronics, and oil and gas equipment businesses and has $1.7 billion in missile orders, according to industry analysts.

If the merger is approved by the Justice Department, it is likely to lead to some additional plant closings and layoffs as the companies try to eliminate overlapping operations, according to industry sources and analysts. Together, the two firms would have 72,000 employes in their steelmaking operations; their combined sales in 1982 were approximately $7.5 billion.

"This is part of a fundamental restructuring of the industry," said Joel S. Hirschhorn, senior analyst with the Congressional Office of Technology Assessment. "It may prevent the collapse of Republic."

The companies have given the Justice Department's antitrust division an initial briefing on the proposal, and may not complete the merger for 30 days, giving government lawyers time to review the plan. The government could ask for additional time, or conceivably seek to block the merger in court.

Such a merger would have raised substantial antitrust questions a decade ago, but it may not now, given the heavy financial losses of U.S. steel companies and the competitive strength of foreign producers, according to Philip Areeda, antitrust professor at Harvard Law School.

"I suspect this administration will be more generous than previous ones in counting international trade" in weighing the competitive impact of the proposal, said former Federal Trade Commission member Robert Pitofsky.

The chief operating officers of the two companies, Raymond A. Hay of LTV and E. Bradley Jones of Republic, said their companies have both spent large amounts to modernize their facilities and have received significant labor concessions. "However, steel is an intensely competitive worldwide business and the steps we have taken to date are not enough," they said.

"J&L and Republic each sells less than 7 percent of the total steel consumed in the United States," they said in a joint statement. "Given the steady competitive decline of the domestic integrated companies and the intensity of foreign competition, we do not believe that the antitrust laws, properly applied, will act as a barrier to the proposed merger."

There was no response from the Justice Department.

The merger plan would combine both steel operations in a wholly owned LTV subsidiary called LTV Steel. Jones would become chairman and David Hoag, president and chief executive of J&L, would become president. The new company would be based in Cleveland, where both Republic and J&L have major steel operations. Both plants would be able to use Republic's modern, efficient continuous casting facility, an LTV official noted, citing this as an example of cost savings made possible by the merger.

Shareholders of both companies would have to approve the plan. For each of their shares of common stock, Republic stockholders would receive 1.5 shares of LTV common stock and 0.3 shares of a newly created class of LTV preferred stock convertible into LTV common stock. Republic's outstanding convertible preferred stock would be exchanged for preferred stock of LTV and would be convertible into LTV common stock.

The value of the LTV common stock received by Republic shareholders was estimated at $492 million based on the latest traded price. The exchange of preferred stock would add an additional $278 million, for a total of more than $770 million, LTV officials said.