Spanish oil giant Repsol said Tuesday it has agreed to buy its struggling Canadian rival Talisman for $8.3 billion (6.6 billion euros), a deal that will extend its global reach.
Under the deal, which was approved by Repsol's board, the Spanish firm will also assume Talisman's debt of $4.7 billion, Repsol said in a statement.
Repsol said it will increase its output by 76 percent to 680,000 barrels of oil equivalent per day with the acquisition of Talisman, one of Canada's largest independent oil and gas producers.
The new firm that emerges will be "among the 15 largest privately owned oil and gas companies in the world", Repsol added.
"This is an extraordinary operation for Repsol, for the hydrocarbon sector and for the Spanish economy," Spain's Industry Minister Jose Manuel Soria told reporters.
Repsol is flush with cash after Argentina earlier this year paid it $6.3 billion in compensation for seizing control of YPF, the Spanish firm's subsidiary in the Latin American country.
The company said in November it had around $10 billion to make acquisitions to build up its presence in member states of the Organization for Economic Cooperation and Development rather then exposing itself to the greater political risks typical of emerging economies.
Repsol said the acquisition of Talisman would incorporate "reserves and production in politically stable countries".
"Talisman will contribute first-class producing and exploration assets in North America (Canada and US), Southeast Asia (Indonesia, Malaysia and Vietnam) as well as Colombia and Norway, amongst others," it added.
Repsol will pay $8.0 (6.42 euros) per Talisman share, a 24 percent premium over the average share price of the last three months.
"Once the transaction is complete, North America's weight in the resulting company will increase to almost 50 percent of capital employed in exploration. Latin America will represent 22 percent," Repsol said.
Talisman said in July that it had been approached by Repsol but the Spanish firm reportedly pulled out because the price for the company was too high. Since then Talisman's shares have dropped.
The Standard and Poor's ratings agency in October cut Talisman's credit rating to triple-B-minus, one notch above junk, citing concerns about the company's limited ability to generate enough cash flow to offset high operating costs.
Talisman loaded up on debt as it aggressively pursued overseas expansion. It is now struggling to reduce its debt load amid a slump in oil and gas prices.