updated 7/23/2007 10:53:48 AM ET 2007-07-23T14:53:48

Transocean Inc., the world’s largest offshore drilling contractor, said Monday it will combine with smaller competitor GlobalSantaFe Corp., creating a company with a full range of offshore drilling services in the world’s key markets.

The deal, announced jointly by both Houston-based companies, includes a $15 billion cash payout to shareholders of both Transocean and GlobalSantaFe. Shareholders of both companies will also get shares in the new company.

The two companies estimated the value of the new company will be about $53 billion, including debt.

The new company will retain the Transocean name and trade on the New York Stock Exchange under Transocean’s symbol “RIG.”

Under terms of the deal, Transocean shareholders will receive $33.03 cash and 0.6996 shares of the combined company for each share of Transocean they own. Shareholders of GlobalSantaFe will receive $22.46 cash and 0.4757 shares of the new company for each share of GlobalSantaFe they own.

There will be about 318 million shares outstanding of the combined company after the deal is complete. Transocean shareholders will hold 65 percent of the new company while GlobalSantaFe shareholders will hold 35 percent.

Transocean shares rose $6.79, or 6.2 percent, to $116.76 in morning trading, while GlobalSantaFe shares rose $4.34, or 5.8 percent, to $79.08.

The deal is expected to close by the end of 2007.

Transocean Chief Executive Robert Long will continue as CEO of the new company, while GlobalSantaFe CEO Jon A. Marshall will serve as president and chief operating officer.

GlobalSantaFe Chairman Robert Rose will be chairman of Transocean. The two companies will be equally represented on the new board.

The combined company will have a global fleet of 146 rigs, including harsh-environment jackups and ultra-deepwater drillships.

Marshall said the merger gives the new Transocean a broader customer base, particularly with state-owned national oil companies, which control almost 90 percent of global oil reserves. It also will give Transocean greater exposure in the growing deepwater drilling market.

“This is an ideal fit for the stakeholders in both companies,” Marshall said.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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