updated 8/25/2008 9:11:42 AM ET 2008-08-25T13:11:42

Canada’s Precision Drilling will buy Grey Wolf in a cash and stock deal worth more than $2 billion, the companies said Monday, apparently ending an extended fight for control the Houston gas driller.

Not even two weeks ago Grey Wolf shareholders spurned a rival offer from Basic Energy Services Inc., a wellsite services company in Texas, that would have created a $2.9 billion company.

Under the new agreement, Precision will pay $1.12 billion in cash and 42 million shares valued at $896.7 million, based on Friday’s closing stock price. The new offer involves less cash, but would give Grey Wolf shareholders a larger stake in the new company through a fatter share offering.

Precision gets access to land operations in virtually every oil and gas basin in the lower 48 United States and Canada, and an emerging presence in Mexico.

Kevin Neveu, Precision’s chief executive, called the deal a perfect strategic fit for both companies.

“Grey Wolf’s customer base, experienced employees and rig fleet will be enhanced by Precision’s high performance systems and Super Series rig technology,” Neveu said in a statement. “Together we can deliver high value services that will provide significant value to our customers, employees and securityholders.”

Grey Wolf shareholders have pushed away both Precision and Basic Energy, saying they undervalued access to natural gas in the United States, and industry that is booming.

In April, Basic Energy offered Grey Wolf $1.82 in cash and 0.25 share of the new company for each of their shares.

Precision followed this summer with three unsolicited takeover bids for Grey Wolf, which drills land-based oil and gas wells. Grey Wolf’s board rejected the first two offers but agreed to review Precision’s third bid.

Under the Precision deal, Grey Wolf shareholders will receive $5 cash and 0.1883 newly issued Precision trust units for each Grey Wolf common share held. That is a 4.5 percent increase in shares from Precision’s earlier offer.

“Grey Wolf’s Board of Directors believes this improved offer from Precision is in the best interests of Grey Wolf shareholders, customers, and employees and we are pleased we have been able to reach this agreement,” Thomas P. Richards, Grey Wolf’s chairman, president and chief executive, said in a statement.

Precision Drilling Trust will maintain its headquarters in Calgary, Alberta, but will base U.S. operations in Houston.

David Crowley, Grey Wolf’s executive vice president and chief operating officer, will become president of Precision’s U.S. operations, leading executives from both companies’ management teams, Precision said.

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