updated 9/5/2006 10:47:32 AM ET 2006-09-05T14:47:32

Oil and gas field surveyor Geophysique will buy U.S. rival Veritas for $3.1 billion in cash and stock, both companies announced Tuesday, establishing a major new global player in the booming oil exploration industry.

Compagnie Generale de Geophysique SA and Houston-based Veritas DGC Inc. said both boards had unanimously approved the deal to create CGC-Veritas, "the industry benchmark for seismic technology and services."

Companies offering seismic surveys and other oil exploration services are doing strong business around the world, amid broadly rising demand for oil and pressure on reserves.

The offer, of which just over half is in Geophysique stock, values Veritas shares at $75 — a 21 percent premium above their Friday closing price of $62.18.

Geophysique shares fell 4.4 percent to $163.86 when trading resumed in Paris after the announcement. Analysts said short-term returns would be diluted by the hefty price paid for Veritas, although the deal is seen improving longer-run profitability.

The tie-up is expected to produce earnings per share growth "in single digits" in 2008 after a neutral impact in 2007, said Geophysique Chairman and CEO Robert Brunck, who will retain both roles within the combined company. Veritas Chairman and CEO Thierry Pilenko would become a director on the new company's board.

Geophysique, based in Massy, south of Paris, said it predicted annual merger-related savings of about $44 million by the end of 2007, reaching $65 million the following year.

In their joint statement, Geophysique and Veritas said the combination of their complementary seismic data libraries, data processing and imaging tools would "create the industry reference," with a combined work force of 7,000.

Brunck also forecast revenue of $2.5 billion for the combined company in 2007, and total integration costs of about $20 million, of which $16 million would be booked this year. Geophysique alone posted revenue of $1.12 billion in 2005.

The deal is expected to be completed by the end of 2006, subject to regulatory approval both sides of the Atlantic and a vote by Geophysique shareholders in December, the companies said.

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 This material may not be published, broadcast, rewritten or redistributed.

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