Offshore drilling services company Transocean Ltd. (NYSE: RIG) announced Tuesday that it has agreed to acquire competitor Ocean Rig UDW Inc. (NASDAQ: ORIG) in a deal valued at $2.7 billion. Transocean will pay approximately $2.7 billion for Ocean Rig, including $12.75 and 1.6128 shares of newly issued Transocean stock for each share of Ocean Rig.

According to the announcement, the implied value of $32.28 per Ocean Rig share reflects a premium of 20.4% to the stock’s 10-day volume weighted share price. The boards of directors of both companies have approved the deal. Stockholders of both firms must also approve the deal, which is not subject to any financing condition and is expected to close in the first quarter of next year.

The acquisition brings a total of nine high-specification ultra-deepwater drillships and two harsh-environment semisubmersibles to Transocean’s existing fleet of 23 ultra-deepwater floating rigs, 12 harsh-environment floaters, two deepwater floaters and four mid-depth floaters. Transocean is building two new ultra-deepwater drillships and has a 33% interest in a harsh-environment semisubmersible that is also currently under construction.

Transocean’s decision to acquire Ocean Rig indicates a belief (hope?) that deepwater and ultra-deepwater drilling activity will pick up as crude oil prices rise. Exxon Mobil told investors earlier this year that it expects to make a 10% profit on its new discoveries offshore of Guyana if crude prices maintain a floor of $40 a barrel. Brent crude traded around $78 a barrel Tuesday afternoon.

Ocean Rig emerged from bankruptcy last October after wiping out $3.7 billion in debt. The fresh company was controlled by three investment firms.

Transocean CEO Jeremy Thigpen said:

Transocean’s pro forma fleet will be comprised of 57 floaters, including many of the most technically capable ultra-deepwater floaters, and harsh environment semisubmersibles in the industry. With this unparalleled fleet, the offshore drilling industry’s largest and most profitable backlog totaling $12.5 billion, and approximately $3.7 billion in liquidity, we are well-equipped for the market recovery.

Ocean Rig stock traded up about 12% Tuesday afternoon at $30.33. The stock’s 52-week low is $20.22 and the high, according to Yahoo Finance, is a split-adjusted $1,840.

Transocean stock traded down about 5.7%, at $11.42 in a 52-week range of $8.35 to $14.34, and the stock’s consensus price target is $12.90.

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