updated 6/23/2006 9:20:16 AM ET 2006-06-23T13:20:16

Independent petroleum producer Energy Partners Ltd. said Friday that it has agreed to acquire Stone Energy Corp. for $1.4 billion, thwarting a competing bid from Plains Exploration & Production Co.

New Orleans-based EPL will acquire all of Stone Energy stock for cash and stock at the option of the shareholder, the companies said in a joint statement.

Stone Energy shareholders will be able to chose between receiving a $51 in cash or a certain number of EPL shares, but EPL is paying at most $723 million in cash. Assuming half of the shares are sold for cash, the offer is worth $48.25 per share based upon EPL's Thursday closing stock price of $18.02 on the New York Stock Exchange.

The price is an 18 percent premium to Stone Energy's closing stock price on May 24, the day before the offer was announced.

The deal, which is expected to close in the fourth quarter if shareholders of both companies approve, also includes EPL taking over $800 million of Stone Energy debt.

On April 24, Stone announced that it would be acquired by Plains in a stock-for-stock transaction valued at $1.46 billion, along with the assumption of $483 million in debt. But EPL followed on May 25 with what was described then as a $2 billion offer.

Stone Energy said it terminated its agreement with Plains on Thursday. Energy Partners said it will pay the $43.5 million fee for terminating the deal.

EPL chairman Richard Bachmann said the acquisition would enable his company to become a premier Gulf of Mexico exploration and production company. The companies said the combination would save about $55 million annually in expenses.

Under the agreement, the company will continue as EPL with its headquarters remaining in New Orleans. Bachmann will remain chairman and chief executive officer along with EPL's current management. EPL will keep Stone Energy's offices in Lafayette and Denver and will combine the officers of both companies in Houston.

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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